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Trump exempts automakers from Canada, Mexico tariffs for 1

month

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Asia stocks track Wall Street higher; Hong Kong stocks

surge

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German bond market selloff widens, JGB yields at multi

year high

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Euro set for best week in 16 years ahead of ECB meeting

(Adds picture available with story)

By Ankur Banerjee

SINGAPORE, March 6 (Reuters) - Asian stocks rose on

Thursday as investors held out hope that trade tensions could

ease after U.S. President Donald Trump exempted automakers from

tariffs for a month, while the euro stood tall ahead of the

European Central Bank policy meeting.

Japanese government bonds fell sharply in Asian hours after

German long-dated bonds were swept up in their biggest sell-off

in years as the parties in talks to form Germany's new

government agreed to try to loosen fiscal rules.

Japan's 10-year government bond yield hit a near 16-year

high as sentiment remained fragile.

Much of the focus in markets remains on an escalating global

trade war after 25% tariffs on imports from Mexico and Canada

were imposed on Tuesday along with fresh duties on Chinese

goods, sparking fears about economic growth.

But on Wednesday, the White House said Trump will exempt

automakers from his 25% tariffs on Canada and Mexico for one

month as long as they comply with existing free trade rules.

That led U.S. stocks sharply higher, shoring up Asian

markets in early trade. MSCI's broadest index of Asia-Pacific

shares outside Japan was up 0.86%, while

Tokyo's Nikkei gained 0.8%.

"Obtaining any kind of reliable signal from the headlines is

almost impossible," said Chris Weston, head of research at

Pepperstone.

"One must truly feel for those businesses that need to plan

ahead - with tariff policy changing almost daily, the ability to

have any sort of confidence to make strategic decisions is

currently almost impossible - this will have implications."

China and Hong Kong shares rose on Thursday, a day after

Beijing set an ambitious economic growth target and vowed more

support for domestic consumption and the tech industry as a

trade war with the United States ratchets up.

China's blue-chip index rose 0.6% while Hong

Kong's Hang Seng Index, the best performing major stock

market in the world, surged 2.4%. Hang Seng is up 20% so far

this year and touched its highest level since January 2022 on

Thursday.

ECB DAY

Investor focus on Thursday will be on the European Central

Bank meeting where it is widely expected to cut interest rates

again as policymakers contend with trade war woes and a

rearmament focus in the region.

The meeting comes a day after the euro jumped 1.5% and a

selloff in German bonds as the parties in talks to form

Germany's new government agreed to create a 500 billion euro

infrastructure fund and overhaul borrowing rules.

German 10-year Bund futures fell 0.6% on Thursday,

indicating a likely decline in cash bond prices later. On

Wednesday, the 10-year yield, the euro zone's

benchmark, climbed 30 basis points, in its biggest daily rise

since mid-March 2020, at the height of the pandemic crisis.

The euro was at a four-month high of $1.0808 in

early Asian hours, on course for over a 4% rise this week, its

strongest weekly performance since March 2009.

"Is it the gamechanger that switches Germany from a drag on

activity to an engine of growth? It won't be a magic bullet, but

it is definitely a step in the right direction," said Kyle

Chapman, FX markets analyst at Ballinger Group.

"While Germany has plenty of space to rack up some more

debt, the likes of France and Italy do not have the same

privilege, and a fiscal risk premium might put the reins on a

stimulus-fuelled rally."

The dollar index, which measures the U.S. currency

against six other units, eased to 104.11, touching its lowest

level since early November.

In commodities, gold prices were steady at $2,924.11 per

ounce as traders await the U.S. non-farm payrolls report on

Friday for cues on the Federal Reserve's policy path.

Oil prices tried to catch a break after stumbling in the

previous sessions this week, undermined by a larger than

expected jump in U.S. crude stocks, OPEC+ plans to increase

output, and U.S. tariffs on key oil supplies.

Brent futures hovered close to an over three-year

low it touched on Wednesday.