Asian markets rally as Trump says trade talks 'going very well'

Asian markets rallied Friday on signs of progress in the China-US trade talks, with Donald Trump saying they were "going very well", while the pound held gains after the leaders of Britain and Ireland indicated a potential breakthrough in Brexit talks.

After a nervous week on trading floors, negotiators from the world's top two economies kicked off long-awaited negotiations on resolving their long-running tariffs row on a positive footing, easing worries that they might be cut short.

Without elaborating, Trump told reporters: "I will say I think it's going really well. We had a very, very good negotiation with China."

Adding to the positive vibes was news that Trump would meet China's top trade envoy Liu He at the White House.

The developments allowed dealers to breathe a sigh of relief as tensions between the two sides appeared to be growing after the US put new restrictions on Chinese firms over human rights abuses and reports Beijing had narrowed the issues it was willing to discuss.

"The fog of trade war is beginning to lift, giving way to an air of trade optimism sweeping through global capital markets," said Stephen Innes, Asia-Pacific market strategist at AxiTrader.

"Investors are starting to believe there is light at the end of the... tunnel as hope springs eternal."

Hong Kong led gains across Asia, jumping more than one per cent, Tokyo heading into the break one per cent higher and Shanghai adding 0.1 per cent.

Talks are expected to resume on Friday, with hopes they can at least lead to a delay in tariffs due next week being imposed on China.

"The prospect of US-China trade truce that results in the suspension of further planned tariffs increases is rightly welcome news," Rodrigo Catril at National Australia Bank said.

"But as it is often the case, the devil will be in the detail," he warned, adding that if the optimism is to last "a meaningful de-escalation in tensions is required".

And Thanos Vamvakidis, at Bank of America Merrill Lynch, told Bloomberg TV "we are not out of the woods yet".

Markets are also getting some support from rare signs of progress in the Brexit saga after British Prime Minister Boris Johnson and his Irish counterpart Leo Varadkar said they could see a route towards striking a possible divorce deal.

After hours of talks regarding the vexed question of Northern Ireland, the two issued a joint statement that said: "Both continue to believe a deal is in everybody's interest. They agreed that they could see a pathway to a possible deal."

While Varadkar said there were still hurdles to overcome, the news did provide some much-needed hope in the crisis after German Chancellor Angela Merkel was reported to have said Brexit talks were "close to breaking down".

The pound surged two per cent against the dollar on Thursday and also rallied on the euro, and in early Asian trade managed to hold its ground.

"The positive vibe has raised some hope for a chance of a Brexit deal ahead of the EU summit at the end of next week," NAB's Catril added.

Hopes for the China-US talks helped oil prices higher, with traders also cheered by OPEC Secretary-General Mohammad Barkindo saying the grouping of the world's giant producers would do what it could to avert another slump.

Both main contracts rose Friday, having put on more than one per cent the day before.