Japanese stocks post biggest gains in 3 weeks

Amid hopes of trade war truce between the US and China, Japan's stock markets post biggest gains in the past three weeks.

Japanese stocks rose on Monday by the most in three weeks as investors turned optimistic about the chance that the United States and China will reach an agreement to de-escalate their trade war.

At 0142 GMT the Nikkei index was up 0.88% to 23,315.15 as exporters in the industrial equipment sector and the IT sector led the advance, because they benefit from an increase in overseas demand.

The latest wave of optimism came after U.S. President Donald Trump said on Friday a trade deal with China is "potentially very close." Chinese President Xi Jinping also reiterated his desire on Friday for a preliminary trade deal.

However, some traders say they remain sceptical because negotiations between the world's two-largest economies have been fraught and conflicting signals from both sides have caused markets to swing between gains and losses.

"There have been some comments suggesting progress in resolving the U.S.-China dispute, but there are still a lot of risks posed by things like the situation in Hong Kong," said Shusuke Yamada, head of FX and Japan equity strategy at Merrill Lynch Japan Securities in Tokyo.

"Hope hasn't completely collapsed, but we need to closely watch how this plays out."

There were 206 advancers on the Nikkei index against 16 decliners on Monday.

The largest percentage gainers in the index were industrial components maker TDK Corp, which rose 3.48%, followed by non-ferrous metal producer Toho Zinc Co Ltd, gaining 3.42%, and Hitachi Construction Machinery Co Ltd, up by 3.36%.

The largest percentage losses in the index were Sumitomo Dainippon Pharma Co Ltd, down 2.35%, followed by Hino Motors Ltd, losing 2.03% and electronics maker Panasonic Corp, down by 1.54%.

Washington and Beijing have imposed tariffs on each other's goods in a 16-month long dispute over Chinese trade practices that the U.S. government says are unfair.

The tariffs have slowed trade flows and economic growth, making them the biggest risk to the global economy.

If the two sides can agree to roll back even some of these tariffs, that could spark a global rally in equities and other risk assets.

The volume of shares traded on the Tokyo Stock Exchange's main board was 0.4 billion, compared to the average of 1.27 billion in the past 30 days.