Shares in South Korea slipped 1.3%, Australia shed 0.6%, MSCI’s broadest index of Asia-Pacific shares outside Japan declined 1.6%, while Chinese blue chips dropped 1.3%

Asian stocks dropped on Monday after new developments in the U.S.-China trade war spooked markets with already stretched valuations, though there were signs risk sentiment had steadied with U.S. stock futures rising.

A holiday in Japan and the U.S. made for choppy early trading and political uncertainty still shrouded Japanese and European assets.

While U.S. President Donald Trump had threatened 100% tariffs on China from November 1, he sounded more conciliatory over the weekend, posting that everything would be fine and the U.S. did not want to “hurt” China.

Beijing defended on Sunday its curbs on exports of rare earth elements and equipment as a response to U.S. aggression.

We expect the ultimate resolution will be an extension of the current tariff pause past November 10 along with some new but limited concessions from both sides, wrote Jan Hatzius, chief economist at Goldman Sachs in a note.

However, the recent policy moves suggest a wider range of outcomes than was the case ahead of prior U.S.-China talks, with the possibility of greater concessions but also a risk of substantial new export restrictions and higher tariffs, at least temporarily, Hatzius said.

Japanese markets had their own problems with the ascension of new LDP leader Sanae Takaichi to prime minister now in doubt, contributing to a sharp rebound in the yen and a 5% dive in Nikkei futures on Friday.

The Nikkei was closed on Monday. Futures were trading up 1.5% at 46,770 but that was still far below the cash close of 48,088.

Shares in South Korea slipped 1.3%, while Australia shed 0.6%. MSCI’s broadest index of Asia-Pacific shares outside Japan declined 1.6%.

Chinese blue chips dropped 1.3%, though the rare earth and semiconductor sectors both firmed. Data pointed to some resilience in trade with exports rising 8.3%, almost twice the forecast, and imports up strongly.