* Hopes of a U.S.-China trade deal underpin risk assets
* Investors await Trump's televised address on border wall
* Oil prices extend rally on trade hopes
By Hideyuki Sano
TOKYO, Jan 9 (Reuters) - Asian shares inched up on Wednesday, supported by optimism the United States and China can strike a trade deal to avoid an all-out confrontation that will severely disrupt the global economy.
Japan's Nikkei .N225 rose 0.9 percent while MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.3 percent.
Wall Street's S&P 500 .SPX gained 0.97 percent on Tuesday, extending its gains from 20-month lows touched around Christmas to more than 9 percent.
The United States and China will continue trade talks in Beijing for an unscheduled third day on Wednesday, amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China's markets. also reported on Wednesday that U.S. President Donald Trump is increasingly eager to strike a deal with China soon in an effort to perk up financial markets that have slumped on concerns over the trade war, citing people familiar with internal White House deliberations.
The rally in risk assets has accelerated since last Friday, when Federal Reserve Chairman Jerome Powell said he was aware of risks to the economy and would be patient and flexible in policy decisions this year. are scaling back some of their extreme nervousness after Powell effectively did some easing, with his words. But short-covering could run its course soon," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley (NYSE:MS) Securities.
"Hopes on U.S.-China trade talks are helping. Some sort of deals are likely to increase Chinese imports of natural gas, soybeans and so on from the U.S. Yet, it should be hard to resolve more structural issues such as intellectual property rights," he added.
Oil prices also extended their rallies on hopes of progress in the trade talks.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 rose above $50 per barrel for the first time in 2019 to stand at $50.17, up 0.7 percent.
U.S. bond yields also rose further, with the benchmark 10-year Treasuries yield US10YT=RR rising to 2.730 percent, compared with its one-year low of 2.543 percent hit just before Friday's strong payrolls data.
In another sign of subsiding worries about the U.S. economic outlook, Fed funds rate futures 0#FF: have priced in a small chance of a rate hike this year, a sea change from late last week when a rate cut was almost fully priced in.
In the currency market, the dollar was little changed against major currencies.
The euro traded at $1.1455 EUR= while the dollar stood at 108.81 yen JPY= .
Traders are looking to Trump's prime-time televised address at 9 p.m. (0200 GMT Wednesday), where he is expected to make his case that a border wall is urgently needed despite opposition from Democrats. suggests the dispute on the issue, which has sparked a government shutdown since late December, is nowhere near a resolution.
Trump has considered declaring the border situation a national emergency, which could enable him to bypass Congress' mandate to approve federal spending and to build the wall without its approval.
Such a step, however, would likely face an immediate legal challenge and could lead to further polarisation in the U.S. political environment. (Editingn by Jacqueline Wong)