LONDON (Reuters) – World shares held near five-week lows on Wednesday as renewed trade tensions and fears for the global economy drove investors into the safety of bonds and the Japanese yen, with the latter rising to a six-week high against the dollar.

European shares inched higher in an effort to shake off the gloom of dismal session in Asia and sharp slides on Wall Street, where the trade-sensitive industrial and technology sectors were hit especially hard by fears that a potential trade deal between the United States and China could unravel.

Chinese Vice Premier Liu He is due to visit Washington on Thursday and Friday for trade talks in a last-ditch bid to avert a sharp increase in tariffs on Chinese goods ordered by U.S. President Donald Trump.

MSCI’s Asia-Pacific share index excluding Japan, fell almost one percent to touch its lowest level since late-March, while the pan-European EuroStoxx index was flat, clawing its way back from multi-week lows.

Markets are on tenterhooks given the importance of the talks to world growth, especially given the mixed nature of recent economic data from China.

“I think it’s a major risk that Trump raises tariffs,” said Christophe Barraud, chief strategist at the Market Securities brokerage in Paris.

“If that happens we can imagine that negotiations will break down, implying another few months of uncertainty… All-in all, bonds as well as other safe-havens such as yen, look set to benefit from this situation in the short-term.”

Adding to market jitters was Chinese trade data showing solid imports but an unexpected fall in April exports. The numbers follow lackluster economic data in Europe and signs of steep inventory build-ups in the United States.

“Chinese exports were negative which suggests the world economy remains weak,” Barraud said noting that the latest manufacturing surveys had painted a subdued picture of new export orders worldwide.

“As we saw with New Zealand today, central banks will remain tilted to the dovish side. They are trying to buy some kind of insurance against negative shocks.”

BONDS BENEFIT

New Zealand became the first country in the developed world to cut interest rates since the Fed turned tail on policy earlier this year, though other central banks, from Sweden to Canada have hinted at policy easing.

New Zealand’s central bank governor Adrian Orr cited the U.S.-China trade dispute as a major risk for his country’s economy.

The decision pushed the kiwi dollar to a six-month low, while government bonds jumped, sending yields 5-7 basis points lower across the curve.

On currency markets, investors’ demand for safe-havens boosted the Japanese yen which firmed 0.2 percent against the dollar at 110.07 yen, taking its gains to more than 1 percent this month.

Bonds too have benefited from the worries for growth and trade, with 10-year yields on U.S. Treasuries, German bunds and Japanese government bonds (JGBs) languishing at near one-month lows.

Germany’s 10-year government bond yield, the benchmark for the bloc, hovered near five-week lows at -0.04 percent, not far from the 2-1/2 year low of -0.094 percent while Japan’s 10-year yield burrowed deeper into negative territory and last stood at minus 0.055 percent.

There are concerns also for Germany, the euro zone’s largest economy. While industrial output rose unexpectedly in March, the economy ministry warned that the outlook remained subdued.

The data also follows weak industrial orders figures, and a downward revision of euro zone growth by the European Commission . All that reinforces a weak backdrop for the euro zone economy and a perception that the European Central Bank will keep rates at record low levels for longer than expected.

While the growth gloom can be expected to weigh on commodity prices, oil prices were bolstered by U.S. sanctions on crude exporters Iran and Venezuela, supply cuts by producers and data showing a surge in Chinese crude imports,

Brent crude oil futures at $70.31 per barrel, 43 cents, or 0.6 percent above their last close.

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