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Asia markets jump amid US-China trade talks

Eustance Huang

Stocks in Asia gained on Monday as investor sentiment picked up slightly amid a new round of trade negotiations between the United States and China in Beijing.

Japan's Nikkei 225 bounced 2.44 percent to close at 20,038.97 while the Topix jumped 2.81 percent to finish its trading day at 1,512.53. Shares of automaker Toyota gained 3.15 percent.

South Korea's Kospi gained 1.34 percent to close at 2,037.10 as shares of steelmaker Dongbu Steel skyrocketed almost 30 percent after the company announced plans to issue new shares to draw new investment. Samsung shares rose 3.47 percent.

Australia's benchmark ASX 200 was up 1.14 percent to close at 5,683.20 as most sectors saw gains. The materials subindex advanced 2.22 percent as shares of major miners rose; Rio Tinto was up 2.69 percent, Fortescue Metals Group gained 3.26 percent and BHP Billiton jumped 3.03 percent.

Hong Kong's Hang Seng index also saw gains of around 0.6 percent in late afternoon trade. Shares of China Mobile rose 1.11 percent following Nomura's upgrade of its rating to "buy" from "neutral," citing the company's strong position for the "imminent" next generation 5G wireless standard .


US-China trade talks

Mainland Chinese markets, which are closely watched in relation to Beijing's trade war with Washington, also rose on the day

The Shanghai composite was up around 0.72 percent to close at about 2,533.09 while the Shenzhen composite jumped 1.713 percent to end its trading day at approximately 1,301.41. The Shenzhen component gained 1.584 percent to close at about 7,400.20.

The U.S. and China are holding vice ministerial level trade talks in Beijing on Jan 7-8, according to the Chinese commerce ministry. Reports said a working team led by Deputy U.S. Trade Representative Jeffrey Gerrish will meet Chinese officials to have "positive and constructive discussions."

For its part, China is willing to resolve its trade disputes with the U.S. on an equal footing, according to Lu Kang, spokesman at the Chinese foreign ministry, Reuters reported Monday.

"I'm not sure what the... sort of fundamental substantive point of these trade talks will be," Rob Carnell, ING's chief economist and head of research for Asia Pacific, told CNBC's "Squawk Box" on Monday.

"I'm convinced that this will be displayed as a positive result, whatever they actually agree. What slightly worries me is that at times when the U.S. administration delivers these sorts of positive results, it makes it very contingent on future activities," Carnell said.

The world's two largest economies slapped a series of punitive tariffs on each other's goods last year, sparking concerns over a global economic slowdown. The U.S. has already put tariffs on $250 billion in Chinese goods — and has threatened duties on double that value of products. Beijing has responded with tariffs on $110 billion in U.S. goods targeting politically important industries such as agriculture.

Monday's talks will follow moves and comments from central banks in both the U.S. and China.

The People's Bank of China cut the reserve requirement ratio (RRR) — the amount of cash that banks have to hold as reserves— by 1 percent last Friday in a bid to stimulate lending amid concerns over a slowing economy.

One analyst said the Chinese central bank's moves might not bolster growth in the world's second-biggest economy.

"When you cut the... RRR, you release a lot of liquidity but it's probably just going to go into refinancing bad projects from the past. And these bad projects, they're not gonna stimulate growth," Cliff Tan, East Asian head of global markets research at MUFG Bank, told CNBC's "Street Signs" on Monday.

"Last year, we started the year by saying that China's credit risk had actually risen in 2017 rather than fallen, which is a contrarian view," Tan said. "Defaults in China in 2018 tripled. Both in terms of numbers and in terms of value. Now we're seeing that credit itself is growing so fast it may not be possible to engineer a soft landing."

Over in the U.S., Federal Reserve Chairman Jerome Powell said the central bank would be "patient" in observing how the economy performs this year, and adjust monetary policy accordingly. Powell's comments, along with a strong jobs report stateside, sent stocks soaring last Friday after months of turmoil over concerns that the Fed could raise interest rates too quickly.

Currencies

The U.S. dollar index , which tracks the greenback against a basket of its peers, was at 96.015, retreating from an earlier high of 96.160.

The Japanese yen , widely considered a safe-haven currency, traded at 108.10 against the dollar after seeing highs below 106 in the previous trading week.

The Australian dollar was at $0.7131, recovering from lows around the $0.68 level last week.

"If ever there was a case of a currency going from zero to hero in the space of 24 hours it was the (Australian dollar) between (last) Thursday and Friday," Ray Attrill, head of foreign exchange strategy at National Australia Bank, said in a morning note.

Attrill attributed the Australian dollar's strong rebound late last week to factors such as a recovery in commodity prices as well as a decline in the Cboe Volatility Index , commonly known as the VIX, which fell back to the 21 handle after "having been above 35 on both sides of Christmas day" in 2018. The VIX measures implied volatility on S&P 500 index options.

— Reuters and CNBC's John W. Schoen and Jacob Pramuk contributed to this report.