Asian stocks drifted Tuesday with traders struggling to build on the previous day's broad advance and record lead from Wall Street, with confidence kept in check by ongoing China-US tensions and lack of movement on a new US stimulus.

Technology firms continued to lead a rally in New York, sending the Nasdaq to yet another all-time high, while the S&P 500 closed just short of a record finish as frustrated investors wait for Democrats and Republicans to hammer out a much-needed financial support package.

With lawmakers now in recess and both parties' conventions over the next two weeks, observers warn the chances of anything being agreed any time soon are slim.

The two are also at loggerheads over funding for the US Postal Service, which is expected to see an exceptional number of mail-in ballots in November's election, with Donald Trump looking to limit them over claims of possible fraud.

"A lot of investment professionals as well as retail investors are on the sidelines partially because they are waiting for this second stimulus package," Erin Gibbs, president and chief investment officer at Gibbs Wealth Management, said on Bloomberg TV. "It's not a full-on risk-on environment just yet."

But the stand-off if just one of a number of issues nagging markets, with China-US tensions continuing to sour.

In the latest salvo, the US expanded sanctions on telecoms giant Huawei to further limit its access to computer chips and other products, with officials saying it was using subsidiaries to circumvent measures in place to prevent exports of US-based technology.

Beijing had already slammed Washington for using "digital gunboat diplomacy" after Trump ordered TikTok's Chinese owner ByteDance to sell its interest in the app it bought and merged with TikTok.

Beijing and Washington are already butting heads over a range of issues including Hong Kong and the coronavirus, though while there are concerns the rows could affect the superpowers' recently signed trade pact, such fears have been played down by both sides.

"For the moment, the fact the... trade deal remains in place, and will do while the two sides choose not to hold their six-month review that was to have taken place last weekend, is seen as overriding the building evidence of a technology cold war now under way," said National Australia Bank's Ray Attrill.

In early trade, Asian markets swung in and out of positive territory.

Hong Kong and Shanghai were slightly higher, having enjoyed healthy rallies Monday, while Sydney and Singapore edged up slightly.

Manila and Jakarta were also higher while Wellington jumped more than one percent again after the government delayed New Zealand's general election by four weeks owing to a new virus flare-up in the country.

Tokyo, Seoul and Taipei were all lower.

The first virtual DNC kicked off Monday
The first ever virtual Democratic National Convention kicked off Monday as the party prepares to anoint Joe Biden as its candidate to take on Donald Trump in November. Photo: POOL / Morry Gash

Analysts said there was not too much concern on markets about possible tax hikes if Joe Biden beats Trump in the race for the White House.

"The Democratic Convention kicks off (Monday) and the theme should be that Biden will be good for the economy," said Edward Moya at OANDA.

"Wall Street seems convinced that Biden's tax policy will not kill the stock market as stability in fighting the coronavirus and a conciliatory tone on trade will drive risk higher.

"A Biden presidency could offer greater certainty and stability for the economy."

Tokyo - Nikkei 225: DOWN 0.5 percent at 22,972.43 (break)

Hong Kong - Hang Seng: UP 0.1 percent at 25,361.27

Shanghai - Composite: UP 0.2 percent at 3,444.09

Euro/dollar: UP at $1.1891 from $1.1876 at 2050 GMT

Dollar/yen: DOWN at 105.68 yen from 105.99 yen

Pound/dollar: UP at $1.3130 from $1.3107

Euro/pound: DOWN at 90.54 pence from 90.58 pence

West Texas Intermediate: DOWN 0.4 percent at $42.70 per barrel

Brent North Sea crude: DOWN 0.4 percent at $45.20 per barrel

New York - Dow: DOWN 0.3 percent at 27,844.91 (close)

London - FTSE 100: UP 0.6 percent at 6,127.44 (close)

Copyright AFP. All rights reserved.