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Nikkei Markets

Asian stocks gain as investors await US-China trade developments, ECB, Fed decisions

Posco, Kia Motors among key movers on A300

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan edged higher on Tuesday, as investors stayed focused on the latest U.S.-China trade developments and the extent of potential monetary easing by major central banks.

The Nikkei Asia300 Index of companies outside Japan ended 0.2% higher at 1,324.98. South Korean steelmaker Posco advanced 1.3% after reporting June quarter operating profit that was in-line with estimates. Kia Motors declined 0.6% amid worries over its sales outlook, which overshadowed an increase in its June quarter operating profit. Kia's largest shareholder Hyundai Motor declined 0.8%. The automaker reported a 30% increase in June quarter operating profit on Monday.

The South China Morning Post reported, citing a source familiar with the matter, late yesterday that a U.S. delegation led by trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin were likely to fly to China next week to meet Vice-Premier Liu He. If the meeting takes place, it would be the first face-to-face meeting between the two officials after President Donald Trump and Chinese leader Xi Jinping agreed to a temporary trade truce at the G20 gathering last month.

Meanwhile, the White House said yesterday that Trump met the chief executives of U.S. technology companies and agreed with their request for timely licensing decisions on blacklisted Chinese firm Huawei Technologies, Reuters reported.

In addition to trade, investors' attention was on the upcoming European Central Bank meeting, which could be supportive of risk appetite. According to calculations by Reuters, traders reckon there is about a 46% probability that the ECB will move the benchmark rate further into negative territory.

"While there is a chance that it cuts interest rates, we think that it will wait until it has a new set of economic forecasts in September," Capital Economics said in a note. "We expect the ECB to alter its forward guidance by saying that interest rates will remain "at present or lower" levels and that it "stands ready" to re-start net asset purchases if needed."

The ECB meeting comes ahead of next week's Fed monetary policy review. Amid conflicting signals by Fed policymakers last week, the Fed fund futures indicated that there a 23% chance of a 50-basis-point rate cut at the July 30-31 meeting and 77% chance of a 250-basis-point reduction.

In other movers on the A300 on Tuesday, Tencent Holdings closed 0.3% higher. China's largest game company will partner with a Nintendo affiliate behind the Pokemon franchise to develop new games, strengthening its relationship with an industry titan, the Nikkei Asian Review reported.

China Railway Group fell 0.1% after the construction company said first-half value of newly signed contracts increased 10.5% on-year.

--Nimesh Vora

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