Asian shares started the week on the front foot on signs the US and China were close to striking a tariff deal to end their protracted trade war, while the dollar eased as traders wagered Federal Reserve policy would remain accommodative.
The Wall Street Journal reported on Sunday Washington could lift most or all of its tariffs on Beijing, while a summit between US President Donald Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen later this month.
That followed comments from Trump last week that he had asked China to immediately remove all tariffs on US agricultural products because trade talks were progressing well. He also delayed previously scheduled plans to impose 25 per cent tariffs on Chinese goods.
All of that proved positive for risk sentiment with E-mini futures for the S&P500 and the Dow rising 0.4 per cent each on Monday. Spreadbetters pointed to a positive start for Europe as London's FTSE futures added 0.5 per cent.
In Asia, Chinese shares were the biggest gainers, with the blue-chip index up as much as 3 per cent. Australian shares rose 0.4 per cent and Hong Kong's Hang Seng index added 0.7 per cent.
That left MSCI's broadest index of Asia-Pacific shares outside Japan with gains of 0.3 per cent. The index has risen almost 10 per cent so far this year. Japan's Nikkei strengthened more than 1 per cent.
“Following a robust recovery for risk assets since the start of the year, a number of events in March are going to set the tone for global investors on whether this rebound is sustainable,” said Tai Hui, Asia Pacific Chief Market Strategist at JPMorgan Asset Management.
Tai listed the prospective Trump-Xi trade summit among such events, while China's National People's Congress could provide clues on new policies aimed at boosting Asia's largest economy.
“These policies will be influential to maintain the upbeat onshore sentiment that has driven a strong rebound in the A-share market,” Tai said.
China's CSI300 index rallied last week after index provider MSCI quadrupled its weighting for mainland shares in its global benchmarks.
POLICY EASING?
March is expected to be a crucial month for global markets, with the UK parliament voting on Britain's exit from the European Union while the Fed holds its policy meeting, which could yield clues on plans for future rate hikes and balance sheet reduction.
“While it will take time for economic data to stabilise from the current slowdown, policy shifts by central banks and governments, especially in the US and China, should help support investor confidence for now,” Tai noted.
A slew of surveys late last week highlighted the extent of manufacturers' pain, particularly those exposed to China's slowdown, and added to expectations that central bank policy tightening is as good as finished.
In the US, ISM data showed manufacturing activity for February dropped to its lowest since November 2016, while the University of Michigan survey showed consumer sentiment fell short of expectations in the month.
In addition, a US Commerce Department report showed tame inflation pressures and US personal income falling for the first time in more than three years in January.
The modest inflation lends support to the Fed's patient posture on hiking US interest rates, analysts said.
The dollar index slipped against a basket of major currencies from Friday's one-week high of 96.551. It was last down 0.1 per cent at 96.46.
Against the Japanese yen, the dollar was a tad higher at 111.95. The euro held in familiar ranges and was last at $1.1361. The Australian dollar, a liquid proxy for risk hedges, gained on the broader improvement in sentiment, but disappointing domestic data took the wind out of its sail. The currency was last at $0.7089, after earlier rising as high as $0.7118.
Elsewhere, oil prices firmed on Monday, with Brent futures up 21 cents at $65.28 a barrel. US crude added 19 cents to $55.99.