Asian shares climb on prospects of trade progress, low rates

SHANGHAI (Reuters) – Asian shares ticked higher on Wednesday as more upbeat signals from Sino-U.S. trade talks fanned hopes of an imminent end to tariff hostilities, which helped offset concerns about a slowing U.S. economy.

FILE PHOTO: A man walks past an electronic stock quotation board outside a brokerage in Tokyo, Japan, November 13, 2018. REUTERS/Toru Hanai/Files

The positive mood pushed Wall Street indexes to fresh record closing highs on Tuesday and stoked confidence in early Asian trade with MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS up 0.14%. Australian shares added 0.46% and Japan’s Nikkei .N225 rose 0.41%.

U.S. President Donald Trump said on Tuesday that the United States and China are close to agreement on the first phase of a trade deal after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.

But while Trump said Washington was in the “final throes” of work on a trade deal with Beijing, he also underscored U.S. support for protesters in Hong Kong, seen as a sore point for Beijing.

Nevertheless, the comments were enough to offset soft economic data from the U.S., which showed a fourth straight monthly contraction in consumer confidence and an unexpected drop in new home sales.

Some analysts said that a fall in U.S. bond yields on Tuesday also pointed to more mechanical explanations beyond trade for rising equity prices.

“It reinforces the notion that it really is the Fed pump-priming to grease the wheels of market liquidity which is driving both these moves,” Greg McKenna, strategist at McKenna Macro, said in a morning note.

On Tuesday, the Dow Jones Industrial Average .DJI rose 0.2% to 28,121.68, the S&P 500 .SPX gained 0.22% to 3,140.52 and the Nasdaq Composite .IXIC added 0.18% to 8,647.93. All three indexes notched record closing highs.

On Wednesday, the rally in U.S. Treasuries moderated across most of the curve, with benchmark 10-year notes US10YT=RR yielding 1.7465%, up from their U.S. close of 1.74% on Tuesday.

The two-year yield US2YT=RR, watched as a guide to market expectations of Fed policy, rose to 1.5939% compared with a U.S. close of 1.586%.

In currency markets, the dollar strengthened 0.07% against the yen to 109.11 JPY= and the euro EUR= was slightly weaker, buying $1.1015.

The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was up 0.05% at 98.301.

Oil prices retreated after rising Tuesday on reassuring trade headlines. U.S. West Texas Intermediate crude CLc1 was down 0.36% at $58.20 per barrel.

Gold was lower, changing hands at $1,459.99 per ounce on the spot market XAU=.

Reporting by Andrew Galbraith; Editing by Sam Holmes

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