Japan stocks stretch rally after passing 27-year high on cheap yen; oil up on Nafta deal

A weak yen is positive for Japanese exporters as it inflates profits earned overseas when they are repatriated. PHOTO: AFP

TOKYO (REUTERS, AFP) - Asian stocks were steady on Tuesday (Oct 2) but Japanese equities rose to a fresh 27-year high with the yen hitting a 2018 low.

Crude oil prices meanwhile were elevated in the afterglow of an agreement that salvaged a North American free trade deal. The United States and Canada forged a last-minute deal on Sunday to salvage Nafta as a trilateral pact with Mexico, rescuing a three-country, US$1.2 trillion open-trade zone that had been about to collapse after nearly a quarter century.

The benchmark Nikkei 225 index, which finished at its best level since November 1991 on Monday, added 0.5 per cent, or 121.24 points, to 24,367.00 in early trade while the broader Topix index gained 0.6 per cent, or 10.89 points, to 1,828.85.

"Japanese stocks will chase higher prices after the New York Dow's sharp rise and the yen's drop," Okasan Online Securities chief strategist Yoshihiro Ito said in a note.

The yen was little changed at 113.95 per US dollar, near the weakest since November 2017. A weak yen is positive for Japanese exporters as it inflates profits earned overseas when they are repatriated.

Australia's S&P/ASX 200 Index added 0.1 per cent, South Korea's Kospi index was little changed.

China's financial markets are closed for the week of Oct 1-5 for national holidays.

Wall Street stocks finished mostly positive on Monday after the United States sealed a trade deal with Canada to replace the current North American Free Trade Agreement.

"The Nafta deal is an achievement that President Trump managed to clinch before the US midterm elections, caution in the broader markets is receding for the time being," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

The Canadian dollar traded at C$1.2810 per dollar after rallying to a four-month high of C$1.2782 overnight following the trilateral trade pact.

The euro was little changed at US$1.1577 after slipping 0.25 per cent on Monday on renewed concerns about heavily-indebted Italy's budget.

The single currency has been hurt by concerns that a significant increase in the Italian budget will raise the country's debt levels.

In commodities, US crude futures were up 0.35 per cent at US$75.56 a barrel.

The contracts had surged nearly 3 per cent to US$75.77 a barrel on Monday, their highest since November 2014, as the deal to salvage Nafta stoked economic growth expectations and with US sanctions on Iran also looming.

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