Hong Kong (AFP) - Asian stocks extended their rally Thursday on hopes for an easing of trade war tensions as China and the United States prepare for weekend talks and after Donald Trump flagged a “major trade deal” later in the day.

After the fireworks sparked by the US president’s “Liberation Day” on April 2, markets have enjoyed a period of calm in recent weeks on optimism that countries will reach agreements with Washington to avoid his potentially damaging tariffs.

That sentiment was given a boost this week when Chinese and US officials said top negotiators would meet on Saturday and Sunday for their first negotiations since Trump unveiled his bombshell levies.

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will attend the talks in Switzerland with Chinese Vice Premier He Lifeng.

The gathering has fuelled hopes for a dialling down of tensions between the world’s economic superpowers, which has seen Washington impose levies of 145 percent on China and Beijing retaliate with 125 percent tolls of its own.

Meanwhile, Trump posted on his Truth Social platform that he would announce “a major trade deal with representatives of a big, and highly respected, country” later Thursday.

He did not say which country he was talking about and trading floors were abuzz with speculation, with the New York Times saying it was Britain. The pound extended gains against the dollar in early Asian business.

Asian markets tracked advances on Wall Street, with Hong Kong, Shanghai, Tokyo, Sydney, Seoul, Wellington, Taipei, Manila and Jakarta all in positive territory.

However, the White House’s hardball approach to trade continues to cause anxiety, and Federal Reserve boss Jerome Powell warned Wednesday that there was “a great deal of uncertainty” about where the administration’s policies will end up.

Trump’s moves have sent shivers through world markets, fuelled fears of a global recession and speculation of a reordering of the decades-old trading norms.

In a news conference after the Fed stood pat on interest rates, Powell said: “If the large increases in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment.

“The effects on inflation could be short lived, reflecting a one time shift in the price level,” he added but also warned it was “possible that the inflationary effects could instead be more persistent”.

The Fed, in its post-meeting statement said that “uncertainty about the economic outlook has increased further” and that the chances of higher unemployment and inflation had also risen.

Trump has in recent weeks hit out at Powell for not cutting rates quickly enough, and last month markets were roiled by fears he could try to oust him.

And analysts do not expect the central bank to move until July at the earliest.

“Recent job data, including last Friday’s non-farm payroll, indicate solid momentum, allowing the Fed to maintain its current stance,” said Tai Hui, of JP Morgan Asset Management.

“With only one more set of job data expected before the June 17-18 meetings, the likelihood of a rate cut in June is low.

“The Fed aims to assert its independence amidst pressure from President Trump to reduce rates, requiring significant deterioration in hard data to justify a cut.”

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: UP 0.2 percent at 36,863.15 (break)

Hong Kong - Hang Seng Index: UP 0.9 percent at 22,895.17

Shanghai - Composite: UP 0.1 percent at 3,345.57

Euro/dollar: UP at $1.1317 from $1.1301 on Wednesday

Pound/dollar: UP at $1.3347 from $1.3286

Dollar/yen: DOWN at 143.70 yen from 143.89 yen

Euro/pound: DOWN at 85.04 pence from 85.05 pence

West Texas Intermediate: UP 0.3 percent at $58.26 per barrel

Brent North Sea Crude: UP 0.3 percent at $61.27 per barrel

New York - Dow: UP 0.7 percent at 41,113.97 (close)

London - FTSE 100: DOWN 0.4 percent at 8,559.33 (close)