Stocks rally on China-US hopes, new Japanese PM lifts Tokyo

Global stock markets extended gains on Tuesday amid signs of easing China-US trade tensions and optimism in Japan as the country prepared to inaugurate a new prime minister, lifting Tokyo shares to fresh record highs.

Investors returned to buying after last week’s volatility, which followed US President Donald Trump’s earlier threat to impose 100 percent tariffs on China in response to its new rare earth export restrictions.

Trump, who had previously criticized Beijing’s actions as “extraordinarily aggressive,” adopted a more conciliatory tone, expressing optimism ahead of his upcoming meeting with Chinese President Xi Jinping at the APEC summit in South Korea. He said he was aiming for a “fair” trade deal and highlighted his positive relationship with Xi, adding, “I want to be good to China. I love my relationship with President Xi. We have a great relationship.”

The US leader also played down concerns about a possible Chinese invasion of Taiwan, saying, “I think we’ll be just fine with China. China doesn’t want to do that.” His remarks, following other reassuring comments over the weekend, helped Wall Street extend its tech-driven rally, pushing major indexes higher.

“Markets are travelling on ‘high hopes’ for a thaw in US-China relations, with President Trump listing rare earths, fentanyl and soybeans as top issues ahead of trade talks,” said Rodrigo Catril of National Australia Bank.

Asian markets followed Wall Street’s lead, with Hong Kong climbing more than one percent, and gains across Shanghai, Singapore, Sydney, Seoul, Taipei, Manila, and Jakarta.

Tokyo’s Nikkei surged another 1.5 percent to a new record after Monday’s 3.4 percent jump, as Japan prepared for the historic appointment of Sanae Takaichi as the country’s first woman prime minister. Her deal to form a new coalition helped ease concerns about instability after the Komeito party ended its long-standing alliance with her Liberal Democratic Party following her election.

Investor sentiment has been boosted by expectations that Takaichi will pursue policies similar to those of her mentor, former prime minister Shinzo Abe, including aggressive monetary easing and expanded fiscal spending.

Meanwhile, attention is also focused on Beijing, where Chinese leaders are holding a four-day policy meeting expected to outline measures to boost weak household spending and address ongoing troubles in the property market. The gathering follows data showing China’s third-quarter economic growth met expectations but remained the slowest in a year.

In corporate news, Australian mineral producers rallied after Trump and Australian Prime Minister Anthony Albanese agreed to increase rare earth shipments to the United States. Hastings Technology Metals rose nearly four percent, Lynas Rare Earths gained about five percent, and Iluka Resources jumped more than nine percent.

Key market figures at around 0230 GMT

Tokyo - Nikkei 225: up 1.5 percent at 49,929.81
Hong Kong - Hang Seng Index: up 1.5 percent at 26,225.09
Shanghai - Composite: up 0.6 percent at 3,885.92
Euro/dollar: down at $1.1640 from $1.1641
Pound/dollar: down at $1.3395 from $1.3409
Dollar/yen: up at 151.10 yen from 150.73 yen
Euro/pound: up at 86.90 pence from 86.82 pence
West Texas Intermediate: down 0.5 percent at $57.22 per barrel
Brent North Sea Crude: down 0.3 percent at $60.82 per barrel
New York - Dow: up 1.1 percent at 46,706.58 (close)
London - FTSE 100: up 0.5 percent at 9,403.57 (close)