Stock markets march on amid Biden-Xi talks

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Global stock markets have marched on towards new peaks as US President Joe Biden and Chinese leader Xi Jinping held more than three hours of virtual talks, helping to nudge China's yuan to a five-month high and pulling the US dollar lower.

The closely watched conversation between the leaders of the world's biggest economies appeared to yield no immediate outcome but is widely seen as a joint effort to improve icy relations and avoid direct confrontation.

"Markets are trading north courtesy of the Biden-Xi virtual summit which seems to have somewhat defused US-China tensions," said Stephane Ekolo, global equity strategist at Tradition in London.

"Market participants view such a summit as a positive effort to stabilise a tense relationship, fuelling risk-on mode appetite."

The pan-European STOXX 600, German blue chips and the Paris CAC 40 benchmark all opened to record highs, rising between 0.2 and 0.4 per cent.

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent to its highest level since October 27, while Tokyo's Nikkei gained 0.1 per cent.

Shanghai stocks closed slightly lower with defence stocks leading the losses while Wall Street futures were flat .

All in all, MSCI's world stock index hovered within striking distance of last week's historic peaks.

While some investors are becoming wary of buying into record-breaking equity markets, many analysts believe there is some upside left.

"Although the S&P 500 remains close to record highs, we think strong economic and earnings growth, coupled with an accommodative policy backdrop, should win out over inflation concerns and support further upside for equities," Mark Haefele, CIO at UBS GWM, wrote in a note on Tuesday morning.

The seemingly positive tone of the Biden-Xi talks also helped push the onshore and offshore yuan higher.

The onshore spot price briefly hit a high of 6.3666 per US dollar, the strongest since June 1, before giving up some gains.

The US dollar edged lower in reaction to the improved sentiment and lost ground on the euro, which ticked up from a 16-month low and was last at $US1.1374.

Benchmark 10-year US Treasury yields inched up and were last at 1.6197 per cent, a substantial jump since the one-month low of 1.42 per cent hit one week ago.

In Europe, the yield of the benchmark German 10-year government bond rose by about two basis points to -0.222 per cent.

European Central Bank President Christine Lagarde on Monday pushed back on market bets for tighter monetary policy, saying doing so now to rein in inflation could choke off the euro zone's recovery.

Oil rebounded from a weak start, with Brent futures adding 0.98 per cent at $US82.85 a barrel.

Spot gold rose 0.13 per cent at $US1,865 an ounce, just off Monday's five-month high of $US1,870.

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