SHANGHAI (News Wires) - Asian shares rose on Monday, taking heart from comments by the Federal Reserve chairman that drove Wall Street to record highs on Friday, and as a tweak to the way China's central bank manages its currency boosted the yuan and stocks. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 1.1 per cent, while Japan's Nikkei stock index .N225 closed 0.9 per cent higher. European share markets were set to follow Asia higher, with European spreadbetters expecting Germany's DAX .GDAXI to gain 45 points to 12,439 and France's CAC 40 .FCHI expected to open 22 points higher at 5,454. Adding to the positive mood, US and Mexican trade negotiators appeared close to reaching a common position on the North American Free Trade Agreement (NAFTA), with Mexican Economy Minister Ildefonso Guajardo saying on Sunday that talks have "continued to make progress". A prospective trade deal with Mexico "takes a little bit of global trade war risk off the table," said Robert Carnell, chief economist and head of research, Asia-Pacific at ING. "Every time there's a move toward fewer tariffs from the US instead of more, then that should take a little pressure off the US dollar," he said. In China, shares rose to their highest levels in two weeks. The Shanghai Composite index .SSEC added 1.7 per cent and the blue-chip CSI300 index .CSI300 surged 2.2 per cent, after the People's Bank of China late on Friday revived a "counter-cyclical factor" used to set the midpoint of the daily trading band of the yuan, in a bid to support it. The move raised hopes that a yuan recovery could boost companies with significant dollar-denominated costs, such as airlines. China Southern Airlines (600029.SS) gained 4.4 per cent and Air China (601111.SS) rose 3.7 per cent. The yuan hit a two-and-a-half-week high against the US dollar in early trade on Monday as the PBOC set the day's midpoint CNY=PBOC at a stronger-than-expected level. At 0554 GMT, the yuan CNY=CFXS was trading at 6.8137 per dollar, 53 pips stronger than Friday's onshore close of 6.8190. "China just seems to be stabilizing its currency and we're getting used to that fact now, so we're not looking at an ever-weaker CNY, which could raise issues," said Carnell, adding that "it reduces the scope for outflows." Among other Asian markets, Seoul's KOSPI index .KS11 ended up 0.3 per cent. On Friday, the S&P500 index .SPX and Nasdaq Composite .IXIC hit record highs, following comments from the chairman of the US Federal Reserve, Jerome Powell, who said a gradual approach to raising rates was best to protect the US economy and job growth. The gains cemented the S&P's longest-running bull market, as defined by some investors. S&P500 E-mini futures ESc1 touched a record high of 2,885 on Monday morning in Asia, and were last 0.2 per cent higher at 2,883. "Powell's Jackson Hole speech essentially confirmed the need for further gradual rate hikes and stressed that higher interest rates have served the economy well. However, rate rises remain data-dependent, and other Fed officials reiterated that ‘nothing is predetermined'," ANZ analysts said in a note on Monday. "The Fed Chair's reiteration that rate rises would remain gradual gave the green light to ongoing falls in the USD and increases in equities on Friday," the analysts said. US President Donald Trump said in a Reuters interview last week that he was "not thrilled" with Powell's rate hike policy. The yield on benchmark 10-year Treasury notes US10YT=RR was at 2.8152 per cent, compared with its US close of 2.826 per cent on Friday. The two-year yield US2YT=RR, which rises with traders' expectations of higher Fed fund rates, touched 2.6286 per cent compared with a US close of 2.629 per cent. Australian shares closed 0.3 per cent higher on Monday, after a week of political tumult that installed Scott Morrison as the country's sixth prime minister in less than 10 years. The dollar fell 0.2 per cent against the yen to 111.03 JPY=, while the euro EUR= was flat on the day at $1.1618. The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was flat at 95.143. US crude CLc1 reversed small losses to edge up to $68.74 per barrel. Brent crude LCOc1 was up 0.07 per cent at $75.87 per barrel. Oil prices ended a streak of weekly declines to rise last week on tightening supply, driven by the prospect of lower oil supply from Iran. The United States has pulled out of a nuclear accord it signed with Iran in 2015 and has imposed sanctions on Iran's oil industry and exports. Gold edged higher, with spot gold XAU= trading at $1,206.51 per ounce.
