Japan Stocks climb as US, China reach tentative trade deal

The Japan share market skyrocketed on Friday, 13 December 2019, on renewed optimism that the U.S. and China are close to reaching a deal in their costly trade war after headlines and remarks out of the Trump administration. All industry categories closed in positive territory, with nonferrous metal, marine transportation and machinery-oriented issues being notable gainers. At closing bell, the 225-issue Nikkei Stock Average advanced 598.29 points, or 2.55%, to 24,023.10, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange added 27.15 points, or 1.6%, at 1,739.98.

Traders risk sentiments bolstered on hopes that the trade spat between the world's two largest economies may finally come to an end after President Donald Trump statement that the U.S. is getting close to a "big deal" with China. Traders were also encouraged by reports that US and Chinese negotiators have agreed in principle to the "phase one" trade deal. Washington has offered to slash existing tariffs and cancel new ones set to kick in on Sunday, December 15, in exchange for more agricultural purchases and intellectual property protection.

China's Ministry of commerce said on Thursday that its negotiators were in "close communication" with their American counterparts ahead of the new round of tariffs, but gave no indication whether the trade talks were making progress. But late Thursday, Myron Brilliant, head of international affairs for the U.S. Chamber of Commerce, confirmed that both sides were close to inking a modest trade deal that would suspend the new tariffs and reduce existing ones by an unspecified amount. In return, China would buy more U.S. farm products, increase American companies' access to the Chinese market and tighten protection for intellectual property rights, said Brilliant, who has been briefed by both sides.

Chip-related shares climbed on the trade news. Tokyo Electron jumped 4.4%, while TDK Corp added 4.1%, Taiyo Yuden gained 4.3% and Shin-etsu Chemical advanced 3.9%.

Other sectors that are seen sensitive to U.S-China trade war such as metal companies and shippers also enjoyed a boost.

Shares of non-ferrous metal players advanced, with Sumitomo Metal up 3.8%, while shipping companies went up 2.6%.

Insurers and banks also spiked as trade headlines lifted U.S. long-term bond yields, which would increase their interest income in the future.Insurer index rose 2.4% and banking sector index gained 2.3%.

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