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Major world stock markets climbed Monday, while the dollar faltered, as the US and China traded further blows and investors awaited progress on a stalled American virus stimulus package.
High-level talks between Washington and Beijing on the status of their "phase one" trade agreement - due to have taken place Saturday - were postponed.
It comes as US President Donald Trump ratchets up tensions with Beijing as he seeks to win a November election faced with opinion polls showing him trailing Democrat Joe Biden in key battlegrounds.
China on Monday slammed Washington for using "digital gunboat diplomacy" after Trump ordered TikTok's Chinese owner ByteDance to sell its interest in the Musical.ly app it bought and merged with TikTok.
Cancelled "trade talks between the two countries... has added to the frosty situation", noted David Madden, analyst at CMC Markets UK.
"The lack of agreement between Republicans and Democrats in relation to the stimulus deal remains a concern too."
Investors are keeping tabs on Capitol Hill, with Democrats and Republicans no closer to a new stimulus for the beleaguered US economy.
There are few hopes either for any movement before the end of the month owing to both parties holding conventions over the next two weeks.
Still, the consensus opinion is that a deal will eventually be struck.
"Despite the stimulus package appearing to be in a standstill, the markets appear to be taking the view that major fiscal legislation is inevitable," said AxiCorp's Stephen Innes.
"Presumably based on the assumption that the Republicans will eventually accept a somewhat larger package in light of their incentive to support the economy ahead of the November election, where President Trump is trailing in the polls."
While the coronavirus continues to flare up around the world, forcing the reimposition of containment measures, analysts said stocks will likely continue rising owing to unprecedented backing from central banks.
In Asia, Tokyo's main stocks index closed down 0.8% Monday after data showed Japan's economy contracted the most on record in the second quarter.
"Investors cashed in on recent gains," said Toshikazu Horiuchi, a broker at IwaiCosmo Securities.
"GDP figures were largely within expectations" but reconfirmed the sizable impact of the coronavirus pandemic on the Japanese economy, Horiuchi told AFP.
The April-June GDP figures showed that the economy shrank a record 7.8% quarter-on-quarter, the worst contraction in the nation's modern history.
