Asia report: Nikkei reaches record as regional markets rally

(Sharecast News) - Asia-Pacific equities rallied sharply on Monday, buoyed by signs of progress in US-China trade talks and record highs on Wall Street.

Reports that top negotiators from Washington and Beijing had reached a framework agreement on several long-standing disputes lifted investor confidence across the region.

US Treasury secretary Scott Bessent told CBS News that president Donald Trump's proposed 100% tariffs on Chinese imports were "effectively off the table," and said China was expected to make major soybean purchases while delaying restrictions on rare earth exports.

He added, however, that Washington would maintain its existing export controls.

The prospect of easing trade tensions, combined with expectations of a Federal Reserve rate cut and upcoming Big Tech earnings, fuelled a broad-based rally in Asian equities.

Patrick Munnelly, market strategy partner at TickMill, noted that "global stocks continued their record setting rally, fuelled by growing optimism that the United States and China are edging closer to finalising a trade deal".

"This positive sentiment also drove sharp gains in copper and crude oil prices," he said.

"Meanwhile, Treasuries saw a pullback across the board, and gold lost ground as demand for safe-haven assets waned."

He added that "after months of uncertainty, easing trade tensions between the world's two largest economies have reignited appetite for risk-taking and added fuel to the equity rally that began after April's market slump."

Nikkei notches above 50,000 on political sentiment

In Japan, the Nikkei 225 surged 2.46% to 50,512.32, closing above the 50,000 mark for the first time in history.

The broader Topix index rose 1.7% to 3,325.05, also a record.

Gains were underpinned by optimism over fresh fiscal stimulus under new prime minister Sanae Takaichi, who has pledged a proactive spending policy expected to exceed JPY 13.9trn.

Her election as Japan's first female premier earlier this month ignited hopes of a renewed "Abenomics-style" approach to fiscal and monetary expansion.

The rally marked a remarkable turnaround for the Nikkei, which only reclaimed its 1989 Bubble-era peak in February 2024 after 34 years.

Since Takaichi took office, the index had risen 2.5%, and was now up 26.6% for the year.

Technology and industrial stocks led the gains - Kawasaki Heavy Industries jumped 9.02%, Fujikura advanced 7.98%, and SoftBank Group climbed 6.66%, providing the largest boost to the Nikkei.

Advantest, a supplier to Nvidia, rose 6.53% amid optimism about US chip demand.

Analysts said the continued surge in AI-related equities globally had supported Japanese technology names.

Takaichi and president Trump are due to meet Tuesday for their first bilateral summit, following an introductory call over the weekend that reaffirmed cooperation on trade and security.

Chinese equities rise after fresh industrial data

Mainland Chinese equities rose after official data showed industrial profits rose 21.6% year-on-year in September, the fastest pace since November 2023, following a 20.4% increase in August.

The Shanghai Composite gained 1.18% to 3,996.94, while the Shenzhen Component rose 1.51% to 13,489.40.

The rebound in profitability was driven by policies to curb price wars and stabilise producer margins, helping offset persistent deflationary pressure.

China's producer price index fell 2.3% in September, marking a third consecutive year of contraction, while consumer prices slipped 0.3% year-on-year.

Reflecting the improving sentiment, Munnelly observed that "reports suggest that top negotiators from the US and China have reached consensus on several critical issues, clearing the path for presidents Trump and Xi to finalise a deal that could provide much-needed relief to global markets.

"Reflecting this optimism, China's state-run media called on both nations to 'jointly safeguard the hard-earned progress' achieved in recent negotiations ahead of the crucial Trump-Xi summit."

For the first nine months of the year, overall industrial profits rose 3.2%, compared with a 0.9% increase in the January-August period.

Earnings from manufacturing firms were up 9.9%, and profits from utilities climbed 10.3%.

Profits at foreign-invested enterprises rose 4.9%, compared with a 0.3% drop at state-owned companies.

Still, broader economy continued to show uneven momentum.

GDP grew 4.8% in the third quarter, the slowest pace in a year, while fixed-asset investment contracted 0.5% in the first nine months - the first decline since 2020.

Industrial output rose 6.5% in September, up from 5.2% in August, supported by stronger demand for machinery and electronics.

Foreign direct investment into China fell 10.4% year-on-year to CNY 573.75bn in the January-September period, reflecting global uncertainty and persistent investor caution.

The manufacturing sector attracted CNY 150.09bn of inflows, while the services sector drew CNY 410.93bn.

High-tech industries were a bright spot, securing CNY 170.84bn, with e-commerce investment up 155.2%, aerospace equipment up 38.7%, and medical devices up 17.0%.

FDI from Japan rose 55.5%, from the Emirates 48.7%, and from the UK and Switzerland 21.1% and 19.7%, respectively.

Still, FDI for September alone increased 11.2% year-on-year, suggesting tentative stabilisation.

Beijing had pledged to boost domestic demand and accelerate technological upgrades, while avoiding large-scale stimulus that could worsen debt imbalances.

Regional bourses join the Monday cheer

Hong Kong stocks extended gains, with the Hang Seng Index rising 1.05% to 26,433.70.

Mainland technology shares listed in the city advanced, led by a 6.2% rise in Baidu, while WuXi AppTec gained 4.07% and SMIC climbed 3.5%.

In Seoul, the Kospi jumped 2.57% to a record 4,042.83, crossing the 4,000 threshold for the first time.

The small-cap Kosdaq rose 2.22% to 902.7.

Gains were broad-based, with MetaLabs surging 29.98%, Hanmi Pharm up 26.25%, and Foosung adding 19.24%.

K-pop label Hybe rose nearly 10% after reports that BTS was preparing a 65-city world tour, half of which will take place in North America.

Australia's S&P/ASX 200 added 0.41% to close at 9,055.60, helped by strength in insurance and tech names.

AUB Group soared 12.09%, Steadfast Group rose 6.21%, and Life360 advanced 4.65%. Analysts said optimism over global growth and easing inflation expectations were helping offset softness in commodities.

Munnelly pointed out that "the Australian and New Zealand dollars, commonly viewed as proxies for exposure to China's economy, strengthened amid the risk-on sentiment," adding that futures in both the S&P 500 and Nasdaq 100 also extended their record runs.

Markets in New Zealand were closed for the Labour Day holiday.

Greenback weaker as oil prices slip

In currency markets, the greenback eased against major peers as risk appetite improved.

The yen strengthened 0.09% to JPY 152.73 per dollar, while the Australian dollar rose 0.7% to AUD 1.5247 and the New Zealand dollar gained 0.26% to NZD 1.7345.

Oil prices retreated as traders assessed the impact of the trade developments, with Brent crude down 0.93% at $65.33 a barrel and West Texas Intermediate falling 1.06% to $60.85.

Reporting by Josh White for Sharecast.com.