© Reuters. A passerby walks past in front of a stock quotation board outside a brokerage in Tokyo© Reuters. A passerby walks past in front of a stock quotation board outside a brokerage in Tokyo

By Shinichi Saoshiro

TOKYO (Reuters) – Asian stocks slipped on Friday, as U.S.-Iran tensions and anxieties over Sino-U.S. trade talks left markets in the region struggling to match the euphoria on Wall Street over a possible U.S. interest rate cut next month.

Fears of a military confrontation in the Middle East Gulf were raised after Iran shot down a U.S. military drone. The New York Times reported that U.S. President Donald Trump had approved military strikes on Friday against Iran in retaliation, but pulled back from launching the attacks.

In early European trade, the pan-region were down 0.37%, German lost 0.46% and Britain’s futures slipped 0.36%.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.15%. The index was still up nearly 4% on the week, during which it brushed its highest level since May 8.

The rose 0.5%, Australian stocks declined 0.6% and Japan’s shed 0.8%.

Safe haven gold advanced to a six-year high of $1,410.78 an ounce as geo-political tensions and the prospect of lower U.S. interest rates helped boost the precious metal. Gold has soared nearly 5% this week.

“Gold has benefited from its safe haven status amid deteriorating macroeconomic outlook,” wrote commodity strategist at ANZ.

“We believe it will remain a highly relevant portfolio diversifier, as investors seek protection from growing

uncertainties around global economic growth and rising geopolitical risks.”

The hit a record high on Thursday after this week’s Federal Reserve meeting boosted expectations that the central bank will cut interest rates as soon as next month to keep the U.S.-China trade war from stalling economic growth. ()

The Fed signaled easing after the conclusion of its policy setting meeting on Wednesday, saying it was ready to battle growing global and domestic economic risks.

“There is no doubt that this week’s FOMC meeting outcome is positive for the financial markets including those in Asia,” said Kota Hirayama, senior emerging market economist at SMBC Nikko Securities in Tokyo.

“That said, the FOMC alone won’t be able to sustain Asian equities indefinitely until some kind of solution can be worked out for the U.S.-China trade war at the G20, since the region is particularly vulnerable to the conflict.”

Investors have pinned hopes on some sort of compromise emerging when U.S. President Donald Trump meets China’s President Xi Jinping on the sidelines of the G20 summit in Japan on June 28-29.

In currency markets, the prospect of U.S. interest rates being lowered put the dollar squarely on the defensive.

The against a basket of six major currencies fell to a two-week low of 96.495. The index has shed roughly 1% this week.

The greenback has fallen 1.35% versus the yen this week and slid to a six-month low of 107.045 yen on Friday.

The euro was a touch higher at $1.1297 after popping up to an eight-day high of $1.1317 in the previous session. The single currency was headed for a weekly gain of 0.8%.

With the Fed expected to ease policy soon, and with other central banks such as the European Central Bank and the Bank of Japan seen following in their wake, government bonds were on a bullish footing.

The benchmark surged in price and its yield fell below 2% for the first time in 2-1/2 years on Thursday. It last stood at 2.004%.

The German 10-year bund yield touched a record low of minus 0.329% this week while Japan’s 10-year yield fell to a near three-year trough of minus 0.195%.

In oil markets, crude prices dipped following the previous day’s big rally.

oil futures were down 0.35% at $56.87 per barrel after surging more than 5% the previous day after Iran shot down the U.S. military drone, raising fears of supply constraints.