LONDON (Reuters) – Global stock markets marched on towards new peaks on Tuesday as U.S. President Joe Biden and Chinese leader Xi Jinping held over three hours of virtual talk, helping to nudge China’s yuan to a five-month high and pulling the dollar lower.

The closely watched conversation between the leaders of the world’s biggest economies appeared to yield no immediate outcome but is widely seen as a joint effort to improve icy relations and avoid direct confrontation.

“Markets are trading north courtesy of the Biden-Xi virtual summit which seems to have somewhat defused U.S.-China tensions,” said Stephane Ekolo, global equity strategist at Tradition in London.

“Market participants view such a summit as a positive effort to stabilise a tense relationship, fuelling risk-on mode appetite,” he added.

The pan-European STOXX 600, German blue chips and the Paris CAC 40 benchmark all opened to new record highs, rising between 0.2 and 0.4%.

Earlier, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3% to its highest level since Oct. 27, while Tokyo’s Nikkei gained 0.1%.

Shanghai stocks closed slightly lower with defence stocks leading the losses while Wall Street futures were flat.

All in all, MSCI’s world stock index hovered in striking distance of last week’s historic peaks.

While some investors are becoming wary of buying into record-breaking equity markets, many analysts believe there is some upside left.

“Although the S&P 500 remains close to record highs, we think strong economic and earnings growth, coupled with an accommodative policy backdrop, should win out over inflation concerns and support further upside for equities,” Mark Haefele, CIO at UBS GWM, wrote in a note on Tuesday morning.

The seemingly positive tone of the Biden-Xi talks also helped push the onshore and offshore yuan higher.

The onshore spot price briefly hit a high of 6.3666 per dollar, the strongest since June 1, before giving up some gains.

The dollar edged lower in reaction to the improved sentiment and lost ground on the euro, which ticked up from a 16-month low and was last at $1.1374.

Benchmark 10-year U.S. Treasury yields inched up and were last at 1.6197%, a substantial jump since the one-month low of 1.42% hit one week ago.

Later in the day, U.S. retail sales, trade prices and industrial production for October are also due, giving another hint about the health of the world’s biggest economy.

In Europe, the yield of the benchmark German 10-year government bond rose by about 2 basis point to -0.222%.

European Central Bank President Christine Lagarde on Monday pushed back on market bets for tighter monetary policy, saying doing so now to rein in inflation could choke off the euro zone’s recovery.

Oil rebounded from a weak start with Brent futures adding 0.98% at $82.85 a barrel. [O/R]

Spot gold rose 0.13% at $1,865 an ounce, just off Monday’s five month high of $1,870. [GOL/]

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