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Asian stocks rise after Trump, Xi talk; yen dips

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[SYDNEY] Asian stocks, closing in on their worst year since 2011, got some relief on the last day of 2018 after US President Donald Trump reported "big progress" in trade talks with his Chinese counterpart. The yen declined.

The biggest gains were in Hong Kong, while S&P 500 Index and UK futures advanced after Mr Trump said in a tweet that negotiations were "moving along very well" towards a comprehensive deal and Chinese state media cited President Xi Jinping as saying he believed both sides wanted "stable progress".

Trading will be thin with major markets in Japan and China closed and shortened sessions elsewhere. Oil extended gains on the trade optimism.

Australian shares reversed gains as the positive sentiment dampened after a gauge of China's manufacturing industry missed estimates to decline in December, underscoring concern over the slowing domestic economy. The manufacturing purchasing managers index fell to 49.4, falling below 50 - the line between expansion and contraction - for the first time since 2016.

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Market voices on:

Global stocks are set for their worst year since 2008 and oil is mired in its steepest quarterly slump since 2014. Plenty of event risks loom next year, from the UK vote on the Brexit deal to US-China trade talks and the continuing showdown between Mr Trump and Congress over the budget.

The American political landscape is also unsettling investors following departures of senior officials and Mr Trump's repeated criticism of Federal Reserve chairman Jerome Powell.

"It's a positive development," Tony Morriss, Bank of America Merrill Lynch head of economics and rates strategy, said in a Bloomberg TV interview, referring to the easing trade tensions.

"What we'd like to see now is the market pricing out any further action from the Fed, the stock markets stabilising and focusing on some positive headlines on trade." That still leaves an awful lot of uncertainty on the political side going into 2019, he said.

US stocks halted a two-day rally Friday as thin trading added to already-volatile markets, though the S&P 500 Index held onto its first weekly gain in a month. Treasuries, which rose on Friday, won't be trading Monday because of the holiday in Japan.

Markets are also closed in South Korea, the Philippines, Taiwan and Thailand.

Here are some events investors may focus on in coming days:

The US ISM manufacturing PMI is due Friday, Jan 4.

Chinese President Xi Jinping delivers his New Year's address on Monday.

Fed chair Mr Powell is interviewed with predecessors Janet Yellen and Ben Bernanke at the annual meeting of the American Economic Association Friday. Atlanta Fed president Raphael Bostic joins a panel on long-run macroeconomic performance.

And these are the main moves in markets:

Stocks

Hong Kong's Hang Seng Index climbed 1.5 per cent as of 11.25am in Hong Kong.

Australia's S&P/ASX 200 Index fell 0.1 per cent.

S&P 500 futures rose 0.7 per cent. The S&P 500 Index fell 0.1 per cent on Friday.

The MSCI Asia Pacific ex Japan Index added 0.7 per cent.

Currencies

The yen dipped 0.2 per cent to 110.44 per dollar.

The offshore yuan was at 6.8794 per dollar.

The Bloomberg Dollar Spot Index was steady.

The euro traded at US$1.1436, down 0.1 per cent.

The British pound was at US$1.2687, down 0.1 per cent.

Bonds

The yield on 10-year Treasuries dipped five basis points to 2.72 per cent on Friday.

Australia's 10-year bond yield fell about four basis points to 2.32 per cent.

Commodities

West Texas Intermediate crude gained 1 per cent to US$45.76 a barrel, extending a 1.6 per cent advance on Friday.

Gold was steady at US$1,278.59 an ounce.

BLOOMBERG