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Asian Shares Mixed Amid Middle East Tensions

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Asian stocks ended mixed on Friday as escalating tensions between the U.S. and Iran and renewed trade uncertainty kept investors on the sidelines going into the weekend.

After Iran shot down a U.S. military drone over the Strait of Hormuz, U.S. President Donald Trump declined to say whether the U.S. would retaliate against Iran.

Media reports suggest that Trump abruptly pulled back after initially approving a decision to carry out a military strikes against the country.

Chinese shares rose to post their best weekly gains since April on expectations that China's monetary authorities may moderately ease their overall prudent policy stance in the second half of the year.

The benchmark Shanghai Composite Index rose 14.86 points or 0.5 percent to 3,001.98, closing above 3,000 points for the first time since April 30. The index jumped 4.2 percent this week, marking its largest weekly advance since the week ended April 5.

Meanwhile, Hong Kong's Hang Seng Index ended down 76.72 points or 0.3 percent at 28,473.71 after thousands of people surrounded police headquarters, calling for an extradition bill to be scrapped.

Japanese shares fell as weak manufacturing data dented sentiment and investors looked ahead to U.S.-China trade talks for direction.

The IHS Markit Flash Japan Manufacturing Purchasing Managers' Index edged down to 49.5 in June, from 49.8 in May.

Another report showed that Japan's core consumer prices rose 0.8 percent in May from a year earlier due to higher energy costs.

The Nikkei 225 Index dropped 204.22 points or 1 percent to 21,258.64 but ended the week higher by 0.7 percent to post a third week of gains on Fed rate cut hopes. The broader Topix closed 0.9 percent lower at 1,545.90.

An overnight rally in oil prices lifted mining and oil shares. Inpex Corp. and Japan Petroleum Exploration climbed around 4 percent, while Idemitsu Kosan advanced 2.4 percent. Financials fell broadly on falling U.S. Treasury yields.

Australian markets fell as financials lost some ground after four straight sessions of gains following dovish cues from the Reserve Bank of Australia.

The benchmark S&P/ASX 200 Index dropped 36.60 points or 0.6 percent to 6,650.80 after ending at a more than 11-year high the previous day. The broader All Ordinaries Index ended down 33.60 points or 0.5 percent at 6,734.30.

Miners BHP and Rio Tinto eked out modest gains, while smaller rival Fortesce Metals Group advanced 1.7 percent on the prospect of stronger iron ore prices.

Biotherapeutics company CSL tumbled 3.2 percent after it announced an update on the transition to its own Good Supply Practice (GSP) license in China.

Santos, Origin Energy and Woodside Petroleum climbed 1-2 percent as oil prices spiked amid rising geopolitical tensions in the Middle East. Beach Energy shares jumped 4.8 percent.

Seoul stocks ended lower to snap a three-day winning streak, with technology and chemical companies bearing the brunt of the selling ahead of next week's G20 summit in Japan. The benchmark Kospi slid 5.67 points or 0.3 percent to 2,125.62.

New Zealand shares rose modestly, with the benchmark S&P/NZX-50 Index ending up 36.53 points or 0.4 percent at 10,327.29.

Indonesia's Jakarta Composite Index fell 0.3 percent, a day after the country's central bank left its key interest rate unchanged for a seventh month in a row but cut the reserve requirement for banks to ensure adequate liquidity in the system. The central bank also signaled that rates are set to be reduced in the future.

Overnight, U.S. stocks rose on expectations the Federal Reserve may lower lending rates by a quarter point in July and by the same increment in September.

The Dow Jones Industrial Average gained 0.9 percent and the tech-heavy Nasdaq Composite added 0.8 percent, while the S&P 500 surged up 1 percent to reach a record closing high.

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