"As the U.S. -China dispute seems to be heading for a resolution while the developed world is adopting very easy monetary policy, risk assets are enjoying the tail wind", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.
Several announcements from the trade war front have fanned hopes that the world's economic superpowers - who are now finalising a mini trade pact as part of a wider deal - can resolve a long-running tariffs war that has hobbled the global growth outlook.
Muddying the waters further, White House spokeswoman Stephanie Grisham told Fox News Channel on Thursday that the United States is "very, very optimistic" about reaching a trade deal with China soon.
After the blue-chip Dow and broader S&P 500 reached record closing highs on Thursday amid hopes of a trade war truce, United States stock futures pointed to a flat to slightly softer start for Wall Street shares.
"So that's what really has been driving the market: this underlying uncertainty over whether or not we will get that rollback", he added. "The fact that there is some discussion of moving existing tariffs leans more positive". The proportion of tariffs canceled for both sides to reach a "phase one" deal must be the same, but the number to be canceled can be negotiated, he said.
The Chinese commerce ministry, without laying out a timetable, said the two countries had agreed to cancel the tariffs in phases. "The BoE's "mixed messaging suggests that the bar remains quite high for sterling to register a large and sustained move on the back of today's decision", TD Securities said in a research note".
The pan-European STOXX 600 opened down 0.4 per cent at 405 points, 10 ticks from its April 2015 record of 415.
Shanghai also weakened after data showed Chinese exports and imports fell again last month, though not by as much as expected.
Caution appeared to be the order of the day across world markets.
His comments came a day after US and Chinese officials reportedly agreed to roll back tariffs on each others' goods in a "phase one" trade deal if it is completed.
The euro held steady Friday, though flirting with a three-week low against the dollar as the U.S. currency benefited from news that China and the USA had agreed to roll back tariffs as part of a potential preliminary pact to end their trade war.
"If anything, markets realize that it will take more of a formal process to get things going and make progress".
Sovereign bond markets steadied after taking a beating this week from U.S./China trade talk optimism.
The euro was down 0.2% against the dollar at $1.1048, having hit three-week lows earlier in the session. The yuan was set for its sixth straight weekly gain.
As investors wind back their buying in safe assets, the 10-year U.S. Treasuries yield rose 11.8 basis points to 1.930% US10YT=RR , marking the biggest daily increase since November 9, 2016, which followed the surprise election victory by Donald Trump. U.S. West Texas Intermediate (WTI) crude CLc1 lost 0.1% to $57.09 per barrel in Asia but has gained 1.4% so far this week.
The dollar rose to near three-month highs versus the yen on the trade news, paring losses earlier in the session, while Australia's China-sensitive dollar hit a near four-month high. At (GMT 18:37), the euro was down 0.26 percent at $1.1021.The dollar index, which measures the greenback against six major currencies, was 0.24 percent higher at 98.37.
A Reuters poll found that the dollar's persistent strength would continue well into next year.