SINGAPORE/NEW YORK (Reuters) – Asian equity markets ground higher as investors tried to look past gathering Sino-U.S. tension and renewed coronavirus lockdowns to upcoming company earnings, hoping that global stimulus efforts will yield upbeat outlooks.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.6% and touched a 20-week high as Chinese stocks extended their extraordinary rally.

Japan’s Nikkei edged ahead by 0.2%.

The Chinese yuan rose to a four-month high of 6.9872 per dollar and the greenback sat near a one-month low against a basket of currencies. [FRX/]

China was hit first and so is emerging first from the COVID-19 pandemic. In addition, fiscal stimulus, heavy government borrowing driving up bond yields, and a state-media editorial extolling strong fundamentals have stoked euphoria.

“The yuan has a perfect combination for a currency – relatively tight monetary policy; yield spreads moving in favour of the currency and equity prices also rising more than most,” said Deutsche Bank’s chief international strategist, Alan Ruskin.

“Even before we think of COVID-19 virus divergence indicators, there are enough money and related financial indicators consistent with a dollar/yuan below 7,” he said.

China’s blue-chip index rose for an eighth straight session in early trade on Thursday, gaining 0.6% to touch a five-year high. The Shanghai Composite was up by the same margin and at its highest level since early 2018.

Both have added about 15% this month, and the rally continued in spite of a more circumspect take in Chinese media, which carried a commentary reminding investors about the 2015 crash and suggesting a rational approach to risk-taking.

The mood lifted Australia’s S&P/ASX 200 1%, though New Zealand’s benchmark fell nearly 2% after a Rio Tinto plan to close an aluminium smelter hit energy stocks. [.AX]

Restraint was more evident in other asset classes as investors kept a wary eye on surging coronavirus cases and increasing tension between China and its trading partners, while waiting for U.S. jobs figures at 1230 GMT and next week’s earnings.

U.S. stock futures eased 0.1%, following another session of gains on Wall Street overnight. The yield on benchmark U.S. 10-year Treasuries remained under pressure at 0.6562% and gold sat above $1,800 an ounce.

The U.S. has posted its largest number of daily new infections since the outbreak began and global tensions are on the rise.

Five million Australians are under strict stay-at-home rules in the country’s second largest city of Melbourne.

And – as the West mulls a tougher response to China’s crackdown in Hong Kong – China’s top diplomat said on Thursday that China-U.S. relations face the most serious challenges since diplomatic ties were established.

That has investors hoping to hear some good news about the outlook when U.S. earnings season begins next week.

“Earnings season is upon us, and we really want to see what it looks like,” said Jun Bei Liu, a portfolio manager at Australia’s Tribeca Investment Partners. The focus will be on the outlook as well as on understanding how deeply stimulus efforts have flowed through the real economy, she said.

J.P. Morgan, Citigroup and Wells Fargo report their results on Tuesday, and Microsoft and Netflix on Thursday.

Beyond the yuan, major currencies were mostly steady on Thursday, hanging on to overnight gains against the dollar. The Aussie held near the top of its recent range at $0.6974 and the kiwi briefly made a one-month peak of $0.6583.

Oil prices idled amid concerns about renewed U.S. lockdowns. Brent crude futures was 0.1% weaker at $43.25 per barrel. U.S. crude fell 0.3% to $40.79 per barrel. [O/R]

Graphic: Asian stock markets here

Reporting by Tom Westbrook in Singapore and John McCrank in New York; Editing by Sam Holmes and Tom Hogue

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