TOKYO (REUTERS) - Asian stocks tracked global peers higher on Tuesday (Aug 27) while safe-haven bonds sold off as signs US-China trade hostilities might be easing helped restore investor confidence after the previous session's rout.
Supporting the market mood, US President Donald Trump on Monday flagged the possibility of a trade deal with China and said he believe Beijing was sincere in its desire to reach an agreement. Global markets had been roiled at the start of the week by new tariffs from the world's two largest economies.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.2 per cent after dropping 1.3 per cent the previous day.
South Korea's KOSPI added 0.8 per cent and Japan's Nikkei rose 1 per cent.
Equity markets may have found traction for now but the longer-term outlook for risk assets, buffeted repeatedly by trade concerns, remained shaky.
"There is still a large element of uncertainty regarding the US-China trade dispute. It remains difficult to foresee a resolution, and this will continue to weigh on equity market sentiment," said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.
"Apart from the trade war, the equity markets also have to keep an eye on Brexit proceedings, monetary policy of key players such as the European Central Bank and moves in the Chinese yuan."
In currencies, the dollar held gains made the previous day thanks to a rebound in US Treasury yields.
The dollar index versus a basket of six major currencies stood at 98.027, having risen about 0.5 per cent overnight.
The benchmark 10-year US Treasury yield was at 1.530 per cent, pulled back from a three-year low of 1.443 per cent reached on Monday on the back of wide-spread risk aversion.
The greenback traded little changed at 105.990 yen following a 0.7 per cent gain on Monday, when it had brushed an eight-month low of 104.460.
The euro was effectively flat at US$1.1103 after losing 0.4 per cent on Monday.
The Australian dollar, sensitive to developments in China, Australia's largest trading partner, was steady at US$0.6773 following a gain of 0.3 per cent the previous day.
Crude oil prices recovered some ground after significant losses the previous day on the prospect of crude from Iran, currently facing sanctions, hitting the market.
Brent crude futures were up 0.4 per cent at US$58.94 per barrel after losing 1 per cent the previous day.
Oil prices fell on Monday after French President Emmanuel Macron said preparations were underway for a meeting between Iranian President Hassan Rouhani and President Trump in the coming weeks to find a solution to a nuclear standoff.