Share markets faltered on Wednesday as rising Sino-US trade tensions overshadowed a bounce on Wall Street and left investors reluctant to take positions in anything but the safest of assets.

The US market had taken heart overnight from bets that President Donald Trump's Twitter attacks on Amazon would not translate into actual policy.

Yet trade worries were never far away. Late on Tuesday, the Trump administration had announced 25 per cent tariffs on $50 billion of annual imports from China, covering around 1,300 industrial technology, transport and medical products.

China’s Finance Ministry then responded with its own penalties on $50 billion of US goods ranging from cars, chemicals and corn to whisky, cigars and tobacco. Beijing’s retaliation came after Chinese markets had closed but just as Europe was getting into its stride and quickly accelerated some initial falls.

London’s FTSE and Paris’s CAC40 were down around 0.5 per cent, while the export-heavy German DAX was more than 1 per cent weaker as the nervousness spread.

“The market should be focused on it because it's bad news,” said fund manager Ashmore's head of research Jan Dehn.

“It (US protectionist measures) is the policy equivalent of peeing in your pants to keep warm. In the short term if gives you a fuzzy feeling but in the long term, nothing good is going to come of it.”

The swing in risk sentiment sucked some strength out of the dollar and put the pep back into bonds, with yields on US 10-year Treasury debt down two basis points at 2.76 per cent.

Borrowing costs nudged lower in Europe too even as the first March reading on euro zone inflation, a key release for markets as the European Central Bank looks to wind down its massive monetary stimulus, came in firm at 1.4 per cent.

Benchmark issuer Germany’s Bund yield hovered just under 0.50 per cent, and just off 2-1/2 month lows hit last week.

MSCI's broadest index of Asia-Pacific shares outside Japan had spent most of its session dithering either side of flat before ending 0.3 per cent lower.

Japan's Nikkei added 0.2 per cent in thin volumes, Chinese blue chips went their own way, eventually ending down . But it was South Korea that saw the big move as it dropped 1.4 per cent.

EMini futures for the S&P 500 were also pointing to a sharply lower -1.5 to -1.8 per cent New York open. Wall Street had rallied on Tuesday as investors looked forward to earnings season and the S&P 500 pushed back above a key support level.

The Dow ended up 1.65 per cent, while the S&P 500 gained 1.26 per cent and the Nasdaq 1.04 per cent. Amazon.com shares bounced 1.5 per cent on reports the White House was not about to clamp down on its business model even as Trump continued his attacks on the online retailer.

Factories fade a little

The rising trade rhetoric saw the dollar buckle to 106.16 yen, after edging up from a low of 105.70 on Tuesday. The euro hovered at $1.2296, after easing from a top of $1.2335 overnight, while the dollar index was 0.2 per cent lower at 90.

The Mexican peso and Canadian dollar both held firm after hitting a nearly five-month and five-week highs, respectively in recent day on growing optimism about the prospect of a NAFTA trade deal.

Investors also seemed to be keeping their nerve on the global economic outlook after a host of manufacturing surveys (PMIs) showed some slowing, but from lofty levels in many regions.

Activity in Japan's service sector also grew at its slowest pace in 17 months last month, British shop prices dropped at the fastest pace in more than a year while Australian February building approvals fell 6.2 per cent.

“If global PMIs slow and avoid overheating concerns, that is good for risk appetite. If they slow for “the wrong reasons” like trade protectionism, that is much more worrying,” said Deutsche Bank global strategist Alan Ruskin.

“The March data is at the most a very early warning shot for policymakers not to get too complacent on global growth resilience,” he added.

Trade wars were a particular concern for developing Asia, where South Korea, Taiwan, Thailand, China, Indonesia, and India reported a slowing in factory activity.

In commodity markets, gold jumped 0.7 per cent to $1,342 an ounce, recovering some of Tuesday's losses. Oil prices slipped with Brent crude futures off 75 cents to $67.38 a barrel, while US crude fell 73 cents to $62.78 a barrel.