TOKYO/NEW YORK: Asian shares inched close to 2-1/2-year highs on Friday as revived hopes for a U.S. stimulus deal eclipsed weaker-than-expected jobs data, while mainland Chinese markets jumped after a week-long holiday.
Investors are also increasingly expecting the Democrats to take back the White House, and possibly the Senate as well, in the Nov. 3 U.S. election, analysts said.
A widening lead for Democratic Presidential candidate Joe Biden is seen as reducing the risk of a contested election and opening the way for a big economic stimulus, helping to counter investors' wariness about a Democrat pledge to hike corporate tax rates.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.15per cent, inching closer to its Aug. 31 peak, which was its highest level since March 2018. China's CSI300 index gained 1.68per cent after the Golden Week holidays.
Japan's Nikkei dipped 0.1per cent after hitting a 7 1/2-month high, while futures for the S&P 500 gained 0.47per cent.
"Markets are starting to assume a Biden victory," said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan.
U.S. President Donald Trump on Thursday said talks with Congress had restarted on targeted fiscal relief, after calling off negotiations earlier this week.
House of Representatives Speaker Nancy Pelosi expressed confidence about reaching an agreement on the amount of aid in new legislation.
On Wall Street, the S&P 500 gained 0.80per cent and the Nasdaq Composite added 0.5per cent.
The S&P 500 energy index led sector percentage gains, rising 3.8per cent on the day, after a jump in oil prices due to production shutdowns ahead of a storm in the U.S. Gulf of Mexico and the possibility of supply cuts from Saudi Arabia and Norway.
Still, in a sign markets are pricing in a victory by Biden, clean energy-related shares have outperformed in recent weeks.
The iShares Global Clean Energy ETF has gained 14per cent so far this month, compared to 4per cent gains in the S&P 500 energy index.
"Biden seems to have a clear lead following the TV debate and a coronavirus cluster in the White House, which has raised questions about Trump's crisis management capabilities," said Mutsumi Kagawa, chief global strategist at Rakuten Securities.
A new Reuters/Ipsos poll found Americans are steadily losing confidence in Trump's handling of the coronavirus pandemic, with his net approval on the issue that has dominated the U.S. election hitting a record low.
The November contract of Volatility Index futures dropped to 30.25, its lowest level in three weeks, another sign of reduced worries about a contested election.
The 10-year U.S. Treasuries yield was up 8.5 basis points so far this week to stand at 0.779per cent . It hit a four-month high of 0.797per cent on Wednesday, but has slipped in part due to weak economic data.
The number of jobless claims in the U.S. came in 20,000 higher than economists expected at 840,000, showing unemployment in the world's largest economy remains historically high and a recovery in the labor market is losing momentum.
Additionally, the World Health Organization reported a record one-day increase in global coronavirus cases on Thursday, led by a surge of infections in Europe.
In the currency market, the dollar was on defensive against most other currencies.
The euro firmed slightly to US$1.1771 while the dollar slipped 0.17per cent to 105.85 yen .
The biggest mover was the yuan, which gained more than 1per cent in its first onshore trade in a week, hitting a 1 1/2-year high of 6.7165 per dollar .
Oil prices were little changed on Friday after gains the previous day on output shutdowns and possible supply cuts.
Brent crude stood flat at US$43.34 per barrel, following Thursday's 3.2per cent gains. U.S. West Texas Intermediate (WTI) crude was little changed at US$41.21 after having added US$1.24 cents, or 3.1per cent on Thursday.
(Reporting by Imani Moise and Hideyuki Sano; editing by Richard Pullin)