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

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Fiscal dove Takaichi set to become Japan's PM

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Trump-Xi meeting next week, traders hope for trade

resolution

By Ankur Banerjee

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

Tuesday as the prospect of easing trade tensions between the

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

near-certainty of Sanae Takaichi becoming Japan's next prime

minister sent the Nikkei to a record high.

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 0.86% to a record peak and was

on the cusp of hitting landmark 50,000 points ahead of a

parliamentary vote later in the day that is expected to confirm

fiscal dove 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.

TAKAICHI SET TO BECOME JAPAN'S PM

The spotlight will be on the parliamentary vote later in the

day as hardline conservative Takaichi is all but certain to

become the country's first female prime minister.

The yen was last 0.1% stronger at 150.61 per dollar,

having fallen slightly in the previous session as investors

anticipated that Takaichi's likely premiership after the backing

of the right-wing opposition party Ishin.

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.

Other currencies were mostly calm, with the euro

steady at $1.164925. The dollar index was little changed

at 98.575.

Gold prices were stuck near record highs due to safe-haven

flows and U.S. interest rate cut wagers. Spot gold eased

a bit to $4,350 per ounce, just below the record peak of

$4,381.21 hit on Monday.

(Editing by Sam Holmes)