Both benchmarks lost more than 2 percent the previous day.
Despite the diplomatic move, sentiment in oil markets was broadly cautious due to a rise in U.S. crude production and storage levels, as well as signs that an economic slowdown in Asia would lead to a decrease in demand for oil.
“This build certainly hasn’t helped market sentiment,” Dutch bank ING said in a Reuters report.
Despite oil’s recovery, Asian shares hit a one-year low in early trading on Thursday, as the Turkish currency crisis and fears of a slowdown in China spurred trader anxiety.
China’s Shanghai Composite Index and Hong Kong's Hang Seng index were down 1.1 percent and 0.9 percent, respectively.
The main focus came from China’s Tencent Holdings, after it reported its first quarterly profit fall in nearly 13 years on weak gaming revenue. This was the catalyst for South Korea’s Samsung Electronics to hit a one-year low.
Overnight, Wall Street's major indexes closed lower on Wednesday, with the S&P 500 down 0.8 percent, its biggest percentage drop since late June, after traders were disappointed with recent earnings.
“Tencent’s earnings shock hurt tech stocks, sending the tech-heavy Nasdaq lower. It reminded investors that the U.S.-China trade spat is starting to harm the health of even the tech firms, which had been a major driver of the U.S. share rally,” Norihiro Fujito, senior market strategist at Mitsubishi UFJ Morgan Stanley Securities, told Reuters.
Middle East markets:
Turkish concerns weighed on Gulf markets, with the exception of Abu Dhabi, which was up 1.1 percent as market heavyweight First Abu Dhabi Bank made gains.
FAB, the United Arab Emirates’ biggest lender, ended up 2.5 percent, benefiting from its lack of exposure to the Turkish crisis. FAB is up 38 percent so far this year, one of the biggest gainers on the Abu Dhabi index.
Dana Gas was down 2.6 percent after it reported a 14 percent decrease in Q2 profits, while telecoms firm Etisalat rose 1.2 percent.
Saudi Arabia was down 0.4 percent as volumes began to diminish ahead of the Eid al-Adha holiday. Gulf markets will be mostly closed next week.
While Al Rajhi Bank was down 1.2 percent and Samba Financial fell 0.83 percent, Morgan Stanley said in a note it continues to like Saudi banks, pointing to Samba Financial Group as its top pick.
"Saudi banks are highly capitalised, highly profitable, highly cost efficient, tightly monitored and regulated," the note said.
Dubai shares fell 0.8 percent, as property firms continued to lose value, with Damac Properties down 1.4 percent and Emaar Properties dropping 1.6 percent.
Emirates NBD, Dubai’s biggest bank, lost another 2.3 percent over continued concerns over its $3.2 billion deal to buy Turkey's Denizbank.
The Turkish crisis was also felt in Kuwait, where Burgan Bank fell 1.1 percent, despite announcing it had not seen any impact on profitability from its Turkish subsidiary.
"We are in Turkey for the long run," group chief executive Eduardo Eguren told Reuters. "We have healthy margins and our liquidity is at sound levels and with no material foreign exchange positions in Turkey." Kuwait was down 0.1 percent overall on Wednesday.
Qatar, which on Wednesday pledged to invest $15 billion in Turkey through the financial markets and banks, was down 0.5 percent. Elsewhere, Bahrain rose 0.2 percent, Oman was up 0.4 percent and Egypt was flat.
The dollar held near a 13-month peak on Thursday as political turmoil in Turkey and concerns about China’s economic health spurred traders towards the American greenback.
The dollar index against a basket of six major currencies stood at 96.756 after rising to a 13-month high of 96.984 the previous day.
The Turkish lira plunged to an all-time low of 7.24 on Monday as tensions between Ankara and Washington escalated, but it has since recovered to 6.00 per dollar.
Despite the lira’s rebound, the crisis spread to other emerging market currencies, with the Indian rupee close to its own record low, the South African rand down more than 2 percent overnight and the Chinese yuan at its weakest for 15 months.
Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo, told Reuters events were moving beyond the lira to wider political risks. “Rather than Turkey’s economy, its political situation is now seen as a much larger risk. Turkey’s stand-off with the United States could nudge it closer to countries like Russia, China and Iran, increasing geopolitical risks associated with the region,” he said.
The euro stood little changed at $1.1343, close to a near 14-month trough of $1.1301 set the previous day. The British pound was a shade lower at $1.2686, within close reach of a 13-month low of $1.2662 brushed on Wednesday.
Gold prices were down another one percent on Thursday to hit their lowest in more than 19 months.
Spot gold was down 0.8 percent at $1,164.71 an ounce, as of 0055 GMT. Earlier in the session, bullion fell as much as 1.2 percent to $1,159.96, its lowest since January 2017.
U.S. gold futures were down 1.1 percent at $1,172.7 an ounce.
In other industry news, the Perth Mint, Australia’s largest precious metals refinery, yesterday announced a new gold-backed exchange-traded fund (ETF) with a low-price management fee, entering the field of lower-cost competitors on the New York Stock Exchange.
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(Writing by Shane McGinley; Editing by Michael Fahy)
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