TOKYO (Reuters) -- Asian stocks rose in step with their global peers while safe-haven bonds retreated on Tuesday, as signs Sino-U.S. trade hostilities might be easing for now helped restore investor confidence after the previous session's rout.
Supporting the market mood, U.S. President Donald Trump on Monday flagged the possibility of a trade deal with China and said he believed Beijing was sincere in its desire to reach an agreement. Global markets had been roiled at the start of the week by new tariffs from the world's two largest economies.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3% after dropping 1.3% the previous day.
The Shanghai Composite Index advanced 1%.
South Korea's KOSPI added 0.8% and Japan's Nikkei rose 1.1%.
Equity markets may have found traction for now but the longer-term outlook for risk assets, buffeted repeatedly by trade concerns, remained shaky.
"There is still a large element of uncertainty regarding the U.S.-China trade dispute. It remains difficult to foresee a resolution, and this will continue to weigh on equity market sentiment," said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.
"Apart from the trade war, the equity markets also have to keep an eye on Brexit proceedings, monetary policy of key players such as the European Central Bank and moves in the Chinese yuan."
China's onshore yuan nudged down to a fresh 11-year low of 7.1566 per dollar.
China has allowed the tightly-managed yuan to slide some 3.6% so far this month as trade tensions with the United States worsened. This has triggered fears of a global currency war, in which countries try to weaken their currencies in an attempt to soften the blows of a broader economic slowdown.
"It is clear that the trade conflict between the United States and China is getting ever more serious. The two may still opt to negotiate, but prospects for a quick resolution have diminished greatly as neither side can back down," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
"The trade conflict only increases the torment on the global economy."
The dollar held gains made the previous day helped by a rebound in U.S. Treasury yields.
The dollar index versus a basket of six major currencies stood at 97.990, having risen about 0.5% overnight.
The benchmark 10-year U.S. Treasury yield was at 1.523%, pulled back from a three-year low of 1.443% reached on Monday on the back of wide-spread risk aversion.
The Japanese 10-year government bond yield was up 2.5 basis points at minus 0.255% after plumbing minus 0.285% on Monday, its lowest since July 2016.
The greenback traded at 105.770 yen following a 0.7% gain on Monday, when it had brushed an eight-month low of 104.460.
The euro was effectively flat at $1.1104 after losing 0.4% on Monday.
The Australian dollar, sensitive to developments in China, Australia's largest trading partner, was steady at $0.6773 following a gain of 0.3% the previous day.
Crude oil prices recovered some ground as the broader markets stabilised, trimming some of their significant losses the previous day on the prospect of crude from Iran, currently facing sanctions, hitting the market.
Brent crude futures were up 0.46% at $58.97 per barrel after losing 1% the previous day. U.S. crude rose 0.6% to $53.96 per barrel.
Oil prices fell on Monday after French President Emmanuel Macron said preparations were underway for a meeting between Iranian President Hassan Rouhani and President Trump in the coming weeks to find a solution to a nuclear standoff.