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Nikkei crosses 50,000 for the first time

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Investors pin hopes on US-China trade deal

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Focus on Trump-Xi and central bank meetings, US megacap

earnings

By Ankur Banerjee

SINGAPORE, Oct 27 (Reuters) - Asian stocks surged and

the dollar meandered on Monday as signs of easing trade tensions

between China and the U.S. buoyed risk appetite, in a strong

start to a week that will be headlined by central bank meetings

and megacap earnings.

Top Chinese and U.S. economic officials hashed out on Sunday

the framework of a trade deal for U.S. President Donald Trump

and his Chinese counterpart Xi Jinping to decide on later this

week in their eagerly anticipated meeting in South Korea.

A trade deal would pause steeper American tariffs and

Chinese rare earths export controls, helping soothe investor

nerves that were frayed due to escalating trade tensions between

the world's top two economies.

That sent stocks sharply higher, with South Korea's KOSPI

and Japan's Nikkei adding more than 2% each and

crossing landmarks to record highs. MSCI's broadest index of

Asia-Pacific shares outside Japan rose 1.3%.

"Investors will want to see confirmation that the trade

truce holds and that China's stimulus and reform signals

translate into tangible growth momentum," said Charu Chanana,

chief investment strategist at Saxo.

U.S. stock futures jumped, with Nasdaq futures up

0.88%. European futures were 0.5% higher. The Nikkei

breached 50,000 for the first time while the Kospi rose above

4,000.

The Australian dollar, often seen as a risk and China

proxy, climbed 0.42% to $0.6541, near a two-week high. Chinese

shares opened higher, with blue-chip stocks adding

0.84%. Hong Kong's Hang Seng rose 0.78%.

Safe-haven gold eased 1% on trade deal hopes, while

U.S. Treasuries fell, leaving the 10-year bond yield

up 2.9 basis points. Commodities, including soybeans, wheat and

corn surged on trade deal prospects.

Chris Weston, head of research at Pepperstone, said markets

had largely viewed a trade deal as the higher-probability

outcome, so the news will not come as a major surprise and is

partly priced in.

"That said, relief buying could still put upside risk into"

risk-sensitive assets through the trading week, Weston said.

CENTRAL BANK MEETINGS AWAIT

Investor focus this week will also be on central bank

meetings in Japan, Canada, Europe and the U.S.

The Federal Reserve is widely expected to cut interest rates

by 25 basis points after data showed U.S. consumer prices

increased slightly less than expected in September, but the

government shutdown and its impact on data remain a concern.

"While the bar for the markets to expect anything other than

a 25-bps cut in the upcoming meeting was high, inflation data

should further embolden expectations for a further 25 bps cut in

December, especially if labour data remains sluggish," said

Harun Thilak, head of global capital markets at Validus Risk

Management.

The dollar was little changed at 152.93 yen, hovering

near a two-week high. The euro last bought $1.1635. The

dollar index eased 0.1% at 98.824 in early trading.

The European Central Bank and the Bank of Japan are both

broadly expected to hold rates steady later this week.

Although the BOJ is likely to debate whether conditions are

ripe to resume rate hikes as worries about a tariff-induced

recession ease, political complications may keep it on hold for

now.

FOCUS ON MEGACAP EARNINGS

The busiest part of the U.S. earnings season is upon us,

with megacaps Microsoft ( MSFT ), Apple ( AAPL ), Alphabet

, Amazon ( AMZN ) and Meta Platforms ( META ) all due

to report results this week.

While the profit edge of the "Magnificent Seven", a group of

companies with huge market capitalisations whose shares dominate

equity indexes, over the rest of the index is narrowing, they

are still expected to post stronger results for this period.

A number of the megacap companies are also key players in

the artificial intelligence industry, enthusiasm for which has

been the main driver of stock market performance.

Saxo's Chanana said the U.S. earnings season and guidance

from big tech will be key to gauging how resilient corporate

profits remain in a slowing economy.

"So while sentiment has improved, the coming week will test

whether optimism can turn into durable conviction."

(Editing by Muralikumar Anantharaman)