Asian shares rise on US budget optimism Wednesday 03.00 GMT. Asian shares extended gains on growing confidence that Washington will reach a deal in US budget talks, while Japan's Nikkei index topped 10,000 for the first time since April on expectations of aggressive monetary easing. Investors were focused on US efforts to avoid the looming fiscal cliff - $600bn worth of automatic spending cuts and tax hikes slated to take effect next year, potentially pushing the US economy into recession, unless policy makers reach an agreement. Sentiment brightened after President Obama indicated he is willing to compromise on the level of annual income to be subject to higher taxes - a sign, said optimists, that such compromise can ensure an agreement is reached. The yen fell further against the US dollar, to Y84.36 from Y84.20 late in New York, after Japan reported its fifth straight trade deficit in November. The data will heighten pressure on the Bank of Japan to introduce more stimulus to boost the slowing economy. The Nikkei 225 Stock Average rose 1.1 per cent as exporters continued to benefit from the yen's weakness. The Nikkei has climbed 16 per cent since November 14 on expectations Japan's new government will press for more aggressive policy steps. Toyota Motor surged 2.3 per cent and Canon climbed 4.5 per cent. Japanese banks gained ground after Deutsche Bank upgraded the sector to overweight form marketweight, amid speculation the BoJ will ease monetary policy when a two-day meeting concludes on Thursday. Mitsubishi UFJ Financial Group, Japan's biggest lender, surged 5.9 per cent, Nomura Holdings advanced 4.5 per cent, and Daiwa Securities rose 2.3 per cent. Hong Kong's Hang Seng index added 0.4 per cent, with China Shenhua Energy jumping 2.5 per cent after the Australian Financial Review reported that the company has approached Australia's Whitehaven Coal to buy some assets. Shares in Whitehaven gained 5.3 per cent in Sydney despite the Australian company denying having received any approach. Esprit Holdings sank 5.5 per cent after issuing a profit warning. China's Shanghai Composite index was little changed. Australia's S&P/ASX 200 index gained 0.5 per cent as higher iron ore prices boosted miners. Rio Tinto rose 0.9 per cent, but gold miner Newcrest Mining fell 2.1 per cent after gold prices fell to a three-month low on Tuesday. Billabong International plunged 10.7 per cent as the surfwear group's cut in full-year earnings guidance outweighed a fresh A$526.8m takeover bid. South Korea's stock market was closed for a public holiday as the country went to the polls to elect a new president. In commodities markets, higher risk appetite boosted oil prices with US benchmark crude inching up to $88 a barrel. Gold recovered slightly, up $2.60 to $1,673.50 an ounce. In overnight trading, Wall Street's S&P 500 ended up 1.15 per cent, trading barely 20 points off a fresh five-year peak. The bright mood extended to the euro currency, which was up 0.4 per cent against the dollar to $1.3221 after Standard & Poor's upgraded Greek government debt. Hopes for progress in Washington released some pent up seasonal appetite for risk. US Treasuries sold off, taking the 10-year yield to 1.82 per cent, near the top of a 30 basis point range of 1.55-1.85 per cent that has held since the start of August. The Treasury sold its $35bn auction of new five-year paper at a yield of 0.769 per cent, with demand lower than at the last five-year auction. Additional reporting by Jamie Chisholm, Global Markets Commentator, and Stephen Foley in New York