Asian shares jump on conciliatory US-China trade tone and stimulus hopes

However, analysts are still cautious about prospects of a trade deal

Japan's Nikkei jumped 1.2 per cent on Friday. AP

Asian shares rose to a one-week high on Friday as the US and China returned to the negotiating table to resolve their tariff dispute and on hopes that central banks and governments will do more to avert a global growth slowdown.

Investors were also focused on a string of economic releases due over the weekend including China's official manufacturing survey, which would provide a good gauge of the real impact from the Sino-US trade war.

Japan's Nikkei jumped 1.2 per cent while South Korea's KOSPI index gained 1.7 per cent and Australian shares were 0.9 per cent higher.

The mood lifted after US President Donald Trump said some trade discussions were taking place with China on Thursday, with more talks scheduled.

China's commerce ministry also said a September round of meetings was being discussed by the two sides, but added it was important for Washington to cancel a tariff increase.

The comments spurred hopes for progress in the talks and boosted the Chinese yuan, which ended a ten-day losing streak.

“The S&P futures spike is being blamed largely on the China trade headlines along with fiscal stimulus hopes and the prospect for a steeper US curve,” JP Morgan analysts told clients.

S&P Futures allow an investor to speculate on the future value of various components of the market.

“In reality, the headlines are extremely innocuous and don't differ from what China has said in the past but they crossed during a dead zone of liquidity and attendance and as a result are having an outsized influence on trading.”

Also boosting sentiment, South Korea finalised the most aggressive budget spending plan since the 2008-09 global financial crisis for next year as Asia's fourth-largest economy is buffeted by growing threats both at home and from abroad.

Germany is considering lowering its corporate tax rate while the US government is thinking about issuing 50- and 100-year bonds in a bid to steepen the yield curve.

Trade tensions have dominated market sentiment for much of this year with wild swings in world stocks as rhetoric between the US and China fluctuates from conciliatory to combative. Worryingly, recent economic data has also pointed to a global growth slowdown with business investment, manufacturing activity and exports all going south across major economies.

"The recent escalation of the tariff war provides no hopes of a near-term trade deal," ING's Asia economist Prakash Sakpal wrote.

"As such, we are in for a long stretch of slow growth and increasingly challenging policy environment, as some central bankers have warned."