(Bloomberg) -- Stocks in Asia were primed for gains on optimism that the U.S. and China will make progress in trade talks this week despite some conflicting signals on the outlook. Treasuries fell.
Futures pointed higher in Tokyo, Sydney and Hong Kong after the S&P 500 Index ended Wednesday up nearly 1%. The rally was fueled by speculation that China is still open to a partial deal with the U.S. But in a sign of how tenuous the new-found confidence is, stocks pared gains in the afternoon after a report that China sought to tamp down expectations for progress. Ten-year Treasury yields climbed to 1.58%. The yuan rose offshore for its biggest gain in almost a month.
It’s reaching crunch time for high-level U.S.-China trade talks that are set to resume in Washington on Thursday. While a broad agreement seems unlikely, China indicated it’s open to a limited deal, provided no more tariffs are imposed, according to an official. In return, Beijing would offer non-core concessions like purchases of agricultural products without giving in on major sticking points, the official said, without offering further details.
“It’s encouraging to hear China say that they want to make some sort of small deal,” said Randy Frederick, a vice president of trading and derivatives at Charles Schwab. “If we can get the two sides to agree to not raise tariffs any further than where they are, that would be positive.”
Meantime, traders of Fed funds futures broadly maintained the amount of easing they expect from the Federal Reserve this year after Wednesday’s release of minutes from the latest meeting. They showed officials began debating how far their current interest-rate cutting campaign should extend even as they agreed to lower rates in response to growing risks to the U.S. economy.
Elsewhere, the Turkish currency and its stocks dropped after the country began a military offensive in Syria against Kurdish militants.
Here are some key events coming up this week:
- On Thursday, minutes from the European Central Bank’s most recent gathering are due.
- Chinese President Xi Jinping is scheduled to meet Indian Prime Minister Narendra Modi on Friday and Saturday for an informal summit.
- The U.S. releases a key measure of inflation on Thursday.
Here are the main moves in markets:
- The S&P 500 Index rose 0.9%.
- Futures on Japan’s Nikkei 225 advanced 0.7%.
- Hang Seng Index futures added 0.5%.
- Futures on Australia’s S&P/ASX 200 Index rose 0.6%.
- The yen was at 107.48 per dollar.
- The offshore yuan traded at 7.1370 per dollar after climbing 0.4%.
- The euro bought $1.0975.
- The British pound was at $1.2207.
- The yield on 10-year Treasuries added five basis points to 1.58%.
- West Texas Intermediate crude was flat at $52.65 a barrel.
- Gold held at $1,505.60 an ounce.
--With assistance from April Ma, Vildana Hajric and Robert Brand.
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