HONG KONG: Asian markets rallied with oil and high-yielding currencies on Monday (Feb 18) as investors grow increasingly confident that China and the United States will eventually hammer out a deal to end their long-running trade war.
While talks ended Friday in Beijing with no deal, negotiators shift to Washington this week with Donald Trump saying discussions were going "extremely well" and suggesting he could extend a Mar 1 truce deadline for an agreement to be reached.
The high-level discussions between the economic superpowers are expected to yield a memorandum of understanding ahead of a meeting between Trump and his Chinese counterpart Xi Jinping to finalise a pact.
The upbeat mood in Asia follows a strong lead from Wall Street, while a bipartisan deal to avert another US government shutdown and the Federal Reserve's recent dovish tone on interest rates have also provided support.
The positive news comes at a crucial time as China's economy stutters and the global outlook looks less certain, with the US also showing signs of slowing.
"With a weakening US economy, the motivation for both sides to get something agreed in the short term is quite high as they still debate the more structural issues that lurk in the background," Sunny Bangia, a global equities fund manager at Antipodes Partners, told Bloomberg TV.
Tokyo ended 1.8 per cent higher, while Hong Kong added 1.6 per cent and Shanghai surged 2.7 per cent after data showed a tripling of new Chinese loans, indicating moves to kickstart growth.
Sydney put on 0.4 per cent, while Taipei gained one per cent.
Manila and Jakarta piled on more than one per cent apiece, though Mumbai eased 0.5 per cent.
In early trade, London dipped 0.1 per cent, Paris rose 0.2 per cent and Frankfurt was up 0.1 per cent.
The prospect of an end to the near year-long US-China trade row has also provided a lift to regional currencies against the dollar with investors moving into higher-risk units. Dealers will be closely watching the release later in the week of minutes from the Fed's latest policy meeting, hoping for a better idea of its rate plans.
Indonesia's rupiah, the South Korean won and the Australian dollar were among the biggest gainers.
Oil extended last week's sharp gains on signs that OPEC members and other major producers led by Russia are cutting output.
Both main contracts were higher Monday, with Brent having surged 6.7 per cent last week and WTI soaring 5.4 per cent.
Positive signs from the US-China trade negotiations "gave oil a double boost as it also softened the US dollar as it reduced its appeal as a safe haven", said Alfonso Esparza, senior market analyst at OANDA.
- Key figures around 0820 GMT -
Tokyo - Nikkei 225: UP 1.8 per cent at 21,281.85 (close)
Hong Kong - Hang Seng: UP 1.6 per cent at 28,347.01 (close)
Shanghai - Composite: UP 2.7 per cent at 2,754.36 (close)
London - FTSE 100: DOWN 0.1 per cent at 7,230.53
Euro/dollar: UP at US$1.1311 from US$1.1293 at 2140 GMT on Monday
Pound/dollar: UP at US$1.2914 from U$1.2889
Dollar/yen: UP at ¥110.55 from ¥110.43
Oil - West Texas Intermediate: UP 47 cents at US$56.06 per barrel
Oil - Brent Crude: UP 37 cents at US$66.62 per barrel
New York - Dow: UP 1.7 per cent at 25,883.25 (close)