A look at the day ahead in European and global markets from Ankur Banerjee

And just like that, worries about credit risks are in the rear view. Investors are feeling perky, betting that tensions between the U.S. and China will ease, the Fed will cut rates next week and the earnings season will be strong.

That - let's call it optimism - has pushed stocks across Asia-Pacific to record peaks, with Japan's Nikkei just shy of a landmark 50,000 points.

Tech-heavy Taiwan and South Korea stocks have also hit record highs after strong overnight gains from U.S. tech shares led by Apple.

Hardline conservative Sanae Takaichi is set to be voted in as Japan's first female prime minister later on Tuesday and her appointment continues to push Japanese shares higher on hopes that her pro-stimulus plans will be good for equities.

An acolyte of former Prime Minister Shinzo Abe, Takaichi is expected to appoint another Abe protege, Satsuki Katayama, to the post of finance chief, local media reported. That may be bad news for yen bears as Katayama has suggested the yen's real value is closer to 120-130 per dollar. The yen was last at 151.07.

Over in Europe, the economic calendar is pretty bare and that could be a good thing for risk assets as they take cues from the prospect of the Federal Reserve lowering rates. Traders are ascribing a 98.3% chance of a 25 basis point cut next week.

Meanwhile, investors are also taking comfort from the latest comments from U.S. President Donald Trump on China. Trump said he expects to reach a fair trade deal with Chinese President Xi Jinping as he gears up for a planned meeting with Xi on the sidelines of an economic conference in South Korea next week.

Next week is shaping up to be news heavy with the spotlight on central bank meetings in the U.S. and Japan as well as the meeting between Trump and Xi.

With earnings season in full stride, traders will not only keep an eye on big bellwethers but also parse through reports from regional banks after a turbulent last week where worries over rising credit risk hit sentiment.

Some of the firms reported earnings on Monday with investors relatively comforted by the results.

Key developments that could influence markets on Tuesday:

Earnings: Unicredit, L'Oreal