Stocks rise and gold dips as investors regain confidence

 Stocks edged up on Tuesday, taking comfort from a possible easing in trade tensions between the U.S. and China and an ebbing of nerves over credit risks in the banking sector, which in turn nudged gold lower. In Asia, the near-certainty of Sanae Takaichi becoming Japan's next prime minister briefly sent Tokyo's Nikkei to a record high and dented the yen.   U.S. President Donald Trump said he expected to reach a fair trade deal with Chinese President Xi Jinping when the two meet next week in South Korea, and played down the risks of a clash over the issue of Taiwan.   The prospect of a resolution helped bolster investor sentiment, along with a deal between Australia and the United States for the supply of rare earth materials. INVESTORS BUY THE DIP Investor confidence was hit hard last week as a clutch of bad loans at U.S. regional banks ignited concern over credit risks that threatened to spill into the broader markets. The prolonged U.S. government shutdown also weighed on risk assets. But these worries have abated somewhat and prompted investors to buy the dip ahead of earnings from several large firms. "The market has hurdled the wall of worry with ease, with new capital injected into risk and fresh oxygen into the market’s lungs," said Chris Weston, head of research at Pepperstone.   That said, European Central Bank chief economist Philip Lane on Tuesday issued a stark warning for euro zone banks, saying they could come under pressure in a scenario in which dollar funding dries up. "The combined presence of substantial USD-denominated off-balance sheet exposures and volatile funding means that sudden changes in these net exposures cannot be ruled out," he said. He cited April's extreme market turmoil, in which the dollar and safe-haven U.S. Treasuries sold off hard, which he said made it more difficult for euro zone banks to rely on their dollar-denominated liquid assets. Daiwa Capital Markets economist Chris Scicluna said Lane's remarks spoke to the concern among investors about pockets of risk building across the U.S. financial sector, as investors pile into areas such as AI or credit, and what may happen if those trends reverse.