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Global stock markets showed optimism on Friday as a new development in US-China trade negotiations raised expectations of a deal in the tariff dispute, bolstering risk sentiment.

European equities hit their highest in more than a month, with the pan-European STOXX 600 index up by 0.9 percent to €354.08.

Trade-exposed indexes and stocks also buoyed, with autos advancing 1.4 percent to €475.94, while Germany’s DAX rose 1 percent to €11,029.68.

The surge followed the lead in Asia-Pacific equities, which in turn took their cue from US shares’ performance on Thursday.   

MSCI's broadest index of Asia-Pacific shares outside Japan, which has climbed 1.3 percent this week, gained 0.7 percent to $498.18 on Friday.

The Shanghai Composite added 1.4 percent to CN¥2,596.01, while Hong Kong’s Hang Seng advanced 1.2 percent to HK$27,090.81.

Australia’s S&P/ASX 200 rose 0.5 percent to A$5,879.60, while South Korea’s KOSPI index climbed 0.8 percent to ₩2,124.28.

Japan’s Nikkei gained 1.2 percent to ¥20,661.00, marking a one-month high.

Slight Progress in the US-China Trade War

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A US business-focused newspaper reported on Thursday, citing people close to the internal deliberations, that Treasury Secretary Steven Mnuchin was considering lifting some or all tariffs on China and suggested measures to roll back duties on Chinese goods during trade talks on January 30.

Mnuchin supports the easing of tariffs, but the same cannot be said for US Trade Representative Robert Lighthizer who has reservations about the idea, the newspaper said.

Spokesman for the Treasury Department later denied the report, stating that neither Mnuchin nor Lighthizer have made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China.

This is an ongoing process with the Chinese that is nowhere near completion, the spokesman added.

US stocks initially went up after the report, before paring gains after the Treasury’s denial was published. All three major US indexes advanced for the day, driven by stronger industrial shares.

With equity markets having taken a hit from trade tensions in 2018, even a hint of development in the long-drawn-out trade war between two of the world’s largest economies was enough to improve risk sentiment.

As with the previous year, senior economist Soichiro Monji stated that the US-China trade row remains a key market theme in 2019, and the slight difference is that there are some signs that the two sides are seeking some sort of a resolution.

China seems to be running low on options, while the US would also want to avoid a prolonged conflict given the negative consequences on its markets and the economy, Monji added.

Chinese Vice Premier Liu He is set to visit the US on January 30 and 31 for the latest round of trade talks aimed at resolving the dispute between the two countries.

The US and China agreed last month to a 90-day truce in a trade war that has disrupted the flow of hundreds of billions of dollars of products.

Indicators released recently have signaled a slowdown in the Chinese economy.

For its fourth quarter, which is due to be reported on Monday, China’s economic growth is expected to have slowed to its weakest pace since the global financial crisis as domestic and overseas demand declined.       

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