Portugal Colonial - Most markets extend gains as China-US talks head into second day

There is optimism the negotiations -- which come after the US president spoke to Chinese counterpart Xi Jinping last week -- will bring some much-needed calm to markets and ease tensions between the economic superpowers.

This week's meeting in London will look to smooth relations after Trump accused Beijing of violating an agreement made at a meeting of top officials last month in Geneva that ended with the two sides slashing tit-for-tat tariffs.

The key issues on the agenda at the talks are expected to be exports of rare earth minerals used in a wide range of things including smartphones and electric vehicle batteries.

"In Geneva, we had agreed to lower tariffs on them, and they had agreed to release the magnets and rare earths that we need throughout the economy," Trump's top economic adviser, Kevin Hassett, told CNBC on Monday.

But even though Beijing was releasing some supplies, "it was going a lot slower than some companies believed was optimal", he added.

Still, he said he expected "a big, strong handshake" at the end of the talks.

"Our expectation is that after the handshake, any export controls from the US will be eased, and the rare earths will be released in volume," Hassett added.

He also said the Trump administration might be willing to ease some recent curbs on tech exports.

The president told reporters at the White House: "We are doing well with China. China's not easy.

"I'm only getting good reports."

After a strong start, Asian markets stuttered in the afternoon, though it was not immediately clear what had prompted the step back.

Tokyo, Sydney, Seoul, Wellington, Taipei, Mumbai, Bangkok and Jakarta rose but Hong Kong and Shanghai pared their initial rallies as investors grew nervous ahead of the resumption of the talks. Singapore and Manila also slipped.

London and Paris opened higher but Frankfurt was slightly lower.

"The bulls will layer into risk on any rhetoric that publicly keeps the two sides at the table," said Pepperstone's Chris Weston.

"And with the meeting spilling over to a second day, the idea of some sort of loose agreement is enough to underpin the grind higher in US equity and risk exposures more broadly."

Investors are also awaiting key US inflation data this week, which could impact the Federal Reserve's monetary policy amid warnings Trump's tariffs will refuel inflation strengthening the argument to keep interest rates on hold.

However, it also faces pressure from the president to cut rates, with bank officials due to make a decision at their meeting next week.

While recent jobs data has eased concerns about the US economy, analysts remain cautious.

"Tariffs are likely to remain a feature of US trade policy under President Trump," said Matthias Scheiber and John Hockers at Allspring Global Investments.

"A strong US consumer base was helping buoy the global economy and avoid a global recession."

However, they also warned: "The current global trade war coupled with big spending cuts by the US government and possibly higher US inflation could derail US consumer spending to the point that the global economy contracts for multiple quarters."

- Key figures at around 0715 GMT -

Tokyo - Nikkei 225: UP 0.3 percent at 38,211.51 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 24,142.25

Shanghai - Composite: DOWN 0.4 percent at 3,384.82 (close)

London - FTSE 100: UP 0.3 percent at 8,858.21

Euro/dollar: DOWN at $1.1397 from $1.1420 on Monday

Pound/dollar: DOWN at $1.3497 from $1.3552

Dollar/yen: DOWN at 144.58 yen 144.60 yen

Euro/pound: UP 84.43 from 84.27 pence

West Texas Intermediate: UP 0.2 percent at $65.41 per barrel

Brent North Sea Crude: UP 0.2 percent at $67.20 per barrel

New York - Dow: FLAT at 42,761.76 (close)

P.Cavaco--PC