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Asia: Markets up as Trump debt deal diverts from North Korea

[HONG KONG] Asian markets turned higher on Thursday as Donald Trump's deal to raise the US debt ceiling gave investors some much-needed good news after the North Korea-fuelled sell-off this week.

While tensions over Pyongyang's weekend nuclear test remain high, Mr Trump's insistence to Chinese counterpart Xi Jinping that military action was not his "first choice" and a call for a diplomatic solution provided some solace for now.

Mr Trump agreed a deal with his Democrat rivals to ease the US borrowing limit until December 15 in order to avert a crippling shutdown of the government and also provide funding to help the recovery from Hurricane Harvey in Texas and Louisiana.

"We essentially came to a deal, and I think the deal will be very good," he said after meeting leaders of both parties in the Oval Office.

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During the talks Republicans had called for a long-term deal before Mr Trump shocked the room by jumping in to back Democrats' short-term fix.

The news provided a lift to Asian investors and raised hopes again for the president's market-friendly economic agenda, including tax reform and infrastructure spending.

"Republican back-room squabbling aside I think we all have to agree with Senate Democrat Minority Lead Schumer that this was 'a positive step forward'," said Oanda head of Asia Pacific trading Stephen Innes.

By the break in Tokyo, the Nikkei was up 0.4 per cent as the yen gave back some of its gains enjoyed against the dollar this week.

Hong Kong was up 0.5 per cent, Singapore and Sydney each put on 0.4 per cent while Taipei put on 0.3 per cent.

Seoul climbed 1.2 per cent, boosted by easing concerns over North Korea while the won also picked up.

FED DEPARTURE

However, the positive feeling was tempered by worries the North is preparing to fire another missile this weekend, less than two weeks after launching a rocket over Japan.

"It's clear that global leaders see negotiations as the way forward. The Chinese and Russian leaders have both again in the past 24 hours said that negotiations are the way forward," said Greg McKenna, chief market strategist at AxiTrader.

"And President Trump himself said that military action in North Korea was not his first choice, but we'll see what happens."

On currency markets the dollar held gains against the yen as the rush for safety seen at the start of the week abated, while traders took stock of the surprise resignation of Federal Reserve number two Stanley Fischer, who is considered one of the bank's less dovish members.

Analysts said the announcement could clear the way for boss Janet Yellen's departure when her term ends next year and allow Mr Trump to determine the focus of the Fed by selecting officials perhaps less likely to raise interest rates or favour stringent bank regulations.

The Canadian dollar was sharply higher, adding 1.3 per cent against the greenback after the country's central bank announced a surprise lift in interest rates.

Oil prices edged down after rallying Wednesday on news that refineries shuttered by Hurricane Harvey in the US Gulf Coast were gradually reopening.

AFP

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