Asia stocks closed in positive territory on Wednesday after various news reports pointed to an easing in tensions between the U.S. and China.
Reports emerged in the U.S. overnight that China was moving to cut import tariffs on cars made in the U.S. from 40 percent to 15 percent — that news boosted auto stocks stateside and in Asia. News that Huawei's chief financial officer Meng Wanzhou was granted bail by Canada also added to the positive sentiment.
"On 12 December, there were two positive developments on trade. First: China will cut US automobile import tariffs. Second: Huawei's Meng got bail, which makes the ongoing trade talks between China and the US less complicated," Iris Pang, greater China economist at ING, wrote in a note.
Japanese stocks led gains in the region: The Nikkei 225 closed 2.15 percent higher at 21,602.75 points, while the Topix index ended the day 1.99 percent higher at 1,606.61 points.
Automakers were among the biggest gainers in Japan, following in the footsteps of their peers in the U.S. after reports emerged that China was moving to cut tariffs on cars. Yamaha Motor surged 4.18 percent, Mitsubishi Motor jumped 2.90 percent, while Toyota inched up 2.22 percent. Nissan, still reeling from a recent scandal involving former Chairman Carlos Ghosn, saw a more moderate gain of 0.95 percent.
Over in South Korea, stocks were also higher with the Kospi gaining 1.44 percent to 2,082.57 at Wednesday's close. Shares of major South Korean automakers also jumped: Hyundai Motor surged 6.28 percent and Kia Motors gained 3.03 percent.
The same positive sentiment was seen in Chinese auto stocks, with Shanghai-listed SAIC Motor among the biggest gainers after inching up 1.10 percent.
Bo Zhuang, chief China economist at TS Lombard, said that Beijing's intentions to cut auto import tariffs is simply "a small step in de-escalation."
"The car import tariffs in other countries, currently they're all 15 percent. The reduction from 40 percent to 15 percent is just an equal level with other countries, that's all," he told CNBC's "Street Signs."
China had initially cut import tariffs for all foreign-made cars and car parts from 25 percent to 15 percent in July this year. However, Beijing subsequently raised tariffs on automobiles imported from the U.S. to 40 percent amid escalating tensions with Washington.
Greater China markets were cheered by the developments. The Shanghai composite inched up 0.31 percent to end the day at 2,602.1526 and the Shenzhen composite closed 0.159 percent higher at 1,346.0308. Hong Kong's Hang Seng Index gained some 1.6 percent in late trading.
In Australia, the index gained 1.39 percent to close at 5,653.5.
The gains across Asia followed another volatile trading session on Wall Street amid continued uncertainties surrounding U.S.-China trade relations and the possibility of a government shutdown in Washington.
"Equities have an up and down session amid mixed US-China news ... Trump threat of government shutdown doesn't help either," Rodrigo Catril, senior FX strategist at National Australia Bank wrote in a morning note.
US-China tensions in focus
A court in Canada granted bail to Chinese telecom giant Huawei's CFO Meng Wanzhou on Tuesday, while she awaits a hearing for extradition to the U.S. Her arrest on Dec. 1, during a layover in Canada, heightened trade jitters between the U.S. and China. Meng was arrested at the request of the U.S. for allegedly violating sanctions against Iran. Beijing threatened "serious consequences" over her detention.
Earlier on Wall Street, stocks initially rose across the board after news emerged that China would cut tariffs on cars made in the U.S. In addition, Chinese Vice Premier Liu He was reportedly in discussion with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, with the aim of de-escalating a global trade war.
But some of the initial optimism was dampened after The Washington Post reported the U.S. will condemn China over hacking and economic espionage, potentially ratcheting up tension between the two countries once again.
U.S. stocks also fell after a contentious fight between President Donald Trump and Democratic leadership over border security. Trump threatened to shut down the government if more money was not allocated toward building a wall along the U.S.-Mexico border.
At the end of the trading session, the Dow Jones Industrial Average fell 0.22 percent to 24,370.24, the slipped to close at 2,636.78, and the Nasdaq Composite rose 0.16 percent to 7,031.83.
Brexit developments
Over in Europe, sentiment remained relatively fragile amid deepening political turmoil over the U.K. government's proposed Brexit deal. Prime Minister Theresa May abruptly postponed a parliamentary vote on Monday, sending the sterling down to 20-month lows.
The pound declined further following a tweet from one journalist claiming that May was set to face a leadership challenge from lawmakers within her own party.
The British prime minister has traveled to the Netherlands, Germany and Brussels on Tuesday in an attempt to get a few more concessions from the European side. However, even though the other 27 governments want to help May to get the deal approved in the U.K. parliament, there is no willingness to change the agreement.
Currencies
The U.S. dollar index, which tracks the greenback against a basket of major currencies, was at 97.407 at Asia's close, rising from 97.219 yesterday.
The traded at 113.47 against the dollar after yesterday's 113.37, while the inched up to 0.7209 after yesterday's 0.7206.
— CNBC's Fred Imbert, Sam Meredith and Silvia Amaro contributed to this report.