China Stocks Rally: Rare Earths Surge Amid Trade Talks

China's stock market continued its upward trend, with the rare earth sector reaching a three-year peak ahead of key U.S.-China trade negotiations. Insurers also benefited from favorable policy changes. Analysts suggest U.S.-China relations are improving, although commodity sectors, like steel and coal, saw declines.

In a notable market upswing, China's stock indices extended their five-week rally, largely driven by a significant rise in the rare earth sector, which hit a three-year high on Monday. This surge comes amidst renewed optimism about crucial trade talks resuming between the U.S. and China.

The Shanghai Composite index managed to reverse its earlier losses, closing up by 0.1%, while the CSI300 index gained 0.2%. The focus remains on the rare earth sector's 1.5% climb, which powered onshore markets even as top economic officials from the U.S. and China prepare for discussions in Stockholm. The insurance sector also enjoyed substantial gains, spurred by industry policy changes.

Despite these positive trends, the commodity-related sectors did not mirror the same enthusiasm, with companies in the steel and coal industries seeing losses as Beijing continues its efforts to address overcapacity issues. Nevertheless, market sentiment remains buoyed by the prospect of improved U.S.-China relations and potential policy clearances for Chinese stocks.

(With inputs from agencies.)