Asia stocks find relief as China set to return seized US drone

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Asian shares steadied in early trade on Monday after China agreed to return a drone it had seized, easing worries about rising diplomatic tensions between the world's two biggest economic powers. MSCI's broadest index of Asia-Pacific shares outside Japan tacked on 0.1 percent after falling to its lowest level in three weeks on Friday. Japan's Nikkei dipped 0.2 percent from one-year high.

Financial markets briefly turned "risk-off" in late trade on Friday following news that a Chinese Navy warship had seized a underwater drone in international waters in the South China Sea. The Dow Jones industrial average ended down 0.04 percent to 19,843.41 on Friday, while the S&P 500 lost 0.18 percent to 2,258.07. The furor appears to have been defused for now after the two countries said on Saturday China will return the drone. "I think the markets' trend will continue. Share prices will edge higher and so will bond yields. The dollar will remain strong. One key question is whether the Dow Jones will hit the 20,000 mark," said Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank in Tokyo.

Expectations that President-elect Donald Trump will boost fiscal spending, growth and inflation have prompted investors to bet on a faster pace of rate hikes, boosting bond yields sharply. The 10-year Treasuries yield stood at 2.579 percent in Asia on Monday, near its two-year high of 2.641 percent touched on Thursday. As higher yields shore up the dollar, the dollar's index against a trade-weighted basket of six major currencies jumped to a 14-year high of 103.56 last week. It last stood at 102.71. The euro traded at USD 1.0451,

viny k.samual

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