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Nikkei on the cusp of 50,000 as Takaichi trade charges on

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Fiscal dove Takaichi to become Japan's PM; Yen slips

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Trump-Xi meeting next week, traders hope for trade

resolution

(Updates to Asia afternoon)

By Ankur Banerjee

SINGAPORE, Oct 21 (Reuters) - Asian shares rose on

Tuesday as the prospect of easing trade tensions between the

world's top two economies boosted risk sentiment, while Sanae

Takaichi was set be elected Japan's next prime minister, lifting

the Nikkei and weighing on the yen.

U.S. President Donald Trump said he expects to reach a fair

trade deal with Chinese President Xi Jinping and downplayed

risks of a clash over the issue of Taiwan.

Trade tensions between the U.S. and China have weighed on

the markets in recent weeks, with investor focus now on Trump's

planned meeting with Xi on the sidelines of an economic

conference in South Korea next week.

The lingering hope that a resolution could be on the cards

lifted investor sentiment. MSCI's broadest index of Asia-Pacific

shares outside Japan hit an over

four-and-half-year high and was last up 0.94%. China stocks

rose 0.2% while Hong Kong's Hang Seng was 1%

higher in early trading.

Australian shares surged as investors snapped up

rare earths and critical minerals stocks after the country

signed a supply deal with the United States.

Japan's Nikkei rose to a record peak and was on the

cusp of hitting a landmark 50,000 points as the so-called

'Takaichi trade' showed no signs of stopping. A parliamentary

vote confirmed Takaichi as the nation's next prime minister.

INVESTORS BUY THE DIP

Investor sentiment was also hit hard last week as a clutch

of bad loans at U.S. regional banks spurred concerns over credit

risks that threatened to spill into the broader markets. The

prolonged U.S. government shutdown also weighed on risk assets.

But investors so far this week have shrugged off those

concerns and bought the dip, focusing on upcoming earnings from

several large firms and betting that trade tensions would ease.

"The market has hurdled the wall of worry with ease, with

new capital injected into risk and fresh oxygen into the

market's lungs," said Chris Weston, head of research at

Pepperstone.

Market expectation of the Federal Reserve cutting interest

rates in the next two meetings and comments from White House

economic advisor Kevin Hassett that the federal government

shutdown is likely to end this week also buoyed sentiment.

A broad rally sent all three major U.S. stock indexes to a

sharply higher close overnight with chip stocks hitting a

record high.

Analysts currently expect third-quarter S&P 500 earnings

growth, on aggregate, of 9.3% year-on-year, marking an

improvement over their 8.8% growth estimate as of October 1.

"We're quite bullish on equities as an asset class

globally," said Mixo Das, Asia Equity and Quant Strategist at

J.P. Morgan.

"I think the biggest driver of this is simply the sort

of policy easing that we're seeing ... the economy is not

anywhere close to being in a recession, and policy is still

easing very aggressively.

TAKAICHI WINS LOWER HOUSE VOTE TO BECOME JAPAN'S PM

Hardline conservative Sanae Takaichi was set to become

Japan's first female prime minister after winning a critical

vote in parliament's lower house.

Analysts expect Takaichi to be pro-stimulus and against

further hikes in interest rates, a negative for the yen and

bonds but a plus for equities.

The yen was last 0.4% weaker at 151.39 per dollar,

while also struggling against the euro and sterling.

The Bank of Japan is due to meet next week with traders

pricing in 20% chance of a hike, although Governor

Kazuo Ueda

has so far left his options open by offering few clues on

the timing of a rate hike.

Gold prices slipped 0.8% on the day but were still near the

record high it has been around in the recent weeks.