Asian shares rallied significantly on Monday, with Japan’s benchmark Nikkei 225 index surpassing 50,000 points for the first time, while US futures also jumped.
This upbeat sentiment was largely fuelled by advancements in trade negotiations designed to alleviate friction between the US, China, and other major partners.
US President Donald Trump, during a visit to Malaysia for a Southeast Asian summit, secured preliminary trade agreements with Malaysia, Thailand, Cambodia, and Vietnam.
Adding to the optimism, officials from the world’s two largest economies confirmed on Sunday that a US-China trade deal was drawing closer, having reached an initial consensus for Trump and Chinese leader Xi Jinping to finalise at a high-stakes meeting later this week.
“This isn’t just photo-op diplomacy. Behind the showmanship, Washington and Beijing’s top trade lieutenants have quietly mapped out a framework that might, just might, keep the world’s two largest economies from tearing up the field again,” Stephen Innes of SPI Asset Management said in a commentary.
Trump was heading next to Japan before ending his Asian tour in South Korea where he is expected to meet with Xi on the sidelines of a Pacific Rim summit, the Asia-Pacific Economic Cooperation (known as APEC) forum.
A report by the APEC secretariat released Monday forecast that annual growth in the region circling the Pacific will slow to 3 per cent this year from 3.6 per cent last year, partly due to trade restrictions and higher tariffs.
In Japan, opinion polls showed newly installed Prime Minister Sanae Takaichi enjoying high levels of public support for her market-friendly policies. The Nikkei 225 gained 2.1 per cent to 50,329.08, hitting record intraday highs.
Takaichi is Japan's first female prime minister. She favors raising defense spending and that has boosted prices of stocks in major defense contractors, such as Kawasaki Heavy Industries, which gained 8.7 per cent. IHI Corp. jumped 2.6 per cent and Hitachi gained 2.7 per cent.
Trump has long complained American cars were shut out Japanese markets, one of various reasons he cited for imposing tariffs of 25 per cent, then lowered to 15 per cent, on American's most vital ally in Asia. So Japan’s government has floated the idea of buying a fleet of Ford F-150 trucks to use to inspect roads and infrastructure.
Shares jumped in South Korea, where the Kospi was up 2 per cent at 4,018.73, also a record. Investors there are hoping for a trade deal with Trump.
Chinese markets likewise saw solid gains. Hong Kong's Hang Seng rose 1 per cent to 26,427.34, while the Shanghai Composite index added 1 per cent to 3,991.35.
In Australia, the S&P/ASX 200 picked up 0.3 per cent to 9,047.40.
Taiwan's Taiex gained 2.1 per cent and the Sensex in India was up 0.5 per cent.
On Friday, U.S. stocks hit records after an update on inflation came in a bit less painful than feared.
The S&P 500 rose 0.8 per cent to 6,791.69, topping its prior all-time high set earlier this month. The Dow Jones Industrial Average rallied 1 per cent to 47,207.12, also a record.
The Nasdaq composite climbed 1.1 per cent to a record of 23,204.87.
The data on inflation was encouraging because it could mean less pain for lower- and middle-income households struggling with still-high increases in prices. Even more importantly for Wall Street, it could also clear the way for the Federal Reserve to keep cutting interest rates in hopes of giving a boost to the slowing job market.
The Fed just cut its main interest rate last month for the first time this year, but it’s been hesitant to promise more relief because lower rates can make inflation worse, beyond goosing the economy and prices for investments.
Most big U.S. companies are reporting stronger profits for the latest quarter than analysts expected, also raising hopes for steady growth.
In other dealings early Monday, U.S. benchmark crude oil gained 15 cents to $61.65 per barrel. Brent crude, the international standard, was up 12 cents at $65.32 per barrel.
The U.S. dollar rose to 153.15 Japanese yen from 152.85 yen. The euro slipped to $1.1622 from $1.1636.
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