U.S. President Donald Trump said he expects to reach a fair trade deal with Chinese President Xi Jinping and downplayed risks of a clash over the issue of Taiwan.
Trade tensions between the U.S. and China have weighed on the markets in recent weeks, with investor focus now on Trump’s planned meeting with Xi on the sidelines of an economic conference in South Korea next week.
The lingering hope that a resolution could be on the cards lifted investor sentiment. MSCI’s broadest index of Asia-Pacific shares outside Japan hit an over four-and-half-year high and was last up 0.94%. China stocks rose 0.2% while Hong Kong’s Hang Seng was 1% higher in early trading.
Australian shares surged as investors snapped up rare earths and critical minerals stocks after the country signed a supply deal with the United States.
Japan’s Nikkei rose 0.86% to a record peak and was on the cusp of hitting landmark 50,000 points ahead of a parliamentary vote later in the day that is expected to confirm fiscal dove Takaichi as the nation’s next prime minister.INVESTORS BUY THE DIP Investor sentiment was also hit hard last week as a clutch of bad loans at U.S. regional banks spurred concerns over credit risks that threatened to spill into the broader markets. The prolonged U.S. government shutdown also weighed on risk assets.
But investors so far this week have shrugged off those concerns and bought the dip, focusing on upcoming earnings from several large firms and betting that trade tensions would ease.
“The market has hurdled the wall of worry with ease, with new capital injected into risk and fresh oxygen into the market’s lungs,” said Chris Weston, head of research at Pepperstone.
Market expectation of the Federal Reserve cutting interest rates in the next two meetings and comments from White House economic advisor Kevin Hassett that the federal government shutdown is likely to end this week also buoyed sentiment.
A broad rally sent all three major U.S. stock indexes to a sharply higher close overnight with chip stocks hitting a record high.
Analysts currently expect third-quarter S&P 500 earnings growth, on aggregate, of 9.3% year-on-year, marking an improvement over their 8.8% growth estimate as of October 1.
TAKAICHI SET TO BECOME JAPAN’S PM
The spotlight will be on the parliamentary vote later in the day as hardline conservative Takaichi is all but certain to become the country’s first female prime minister.
The yen was last 0.1% stronger at 150.61 per dollar, having fallen slightly in the previous session as investors anticipated that Takaichi’s likely premiership after the backing of the right-wing opposition party Ishin. [FRX/]
Analysts expect Takaichi to be pro-stimulus and against further hikes in interest rates, a negative for the yen and bonds but a plus for equities.
Other currencies were mostly calm, with the euro steady at $1.164925. The dollar index was little changed at 98.575.
Gold prices were stuck near record highs due to safe-haven flows and U.S. interest rate cut wagers. Spot gold eased a bit to $4,350 per ounce, just below the record peak of $4,381.21 hit on Monday.
