* MSCI AxJ up 0.3% to two-week peak
* ASX up 1% after expansionary budget, QE hopes lift AU bonds
* Currency, bond markets await Fed minutes
* Asian stock markets: tmsnrt.rs/2zpUAr4
SINGAPORE, Oct 7 (Reuters) - Asian stock markets hit a two-week high on Wednesday, brushing off a Wall Street tumble and a drop in commodity prices after U.S. President Donald Trump abruptly cancelled talks with lawmakers on coronavirus-relief spending plans.
Trump broke off talks with Democrats in a Tweet, saying that negotiations will stop until after the election, when he promised a major stimulus bill.
That sent U.S stocks on their steepest drop in two weeks, pushed oil sharply lower and lifted safe assets like the dollar and bonds.
Investors in Asia, however, seemed less rattled, figuring that whoever wins the U.S. presidential election will inherit an economy hungry for stimulus and will probably apply it.
S&P 500 futures were last up 0.2% and European futures only slightly negative, with Euro STOXX 50 futures down 0.4% and FTSE futures down 0.2%.
MSCI’s broadest index of Asia-Pacific shares outside Japan crept 0.4% higher to a fresh two-week peak, led by a 1.3% gain in Australia where an expansionary budget lifted stocks.
“One way or another we’re going to get some stimulus, it’s just we’re not going to get it now,” said ING’s chief economist in Asia, Rob Carnell. “So we’ll tread water for a bit.”
Currency markets and bond markets were broadly steady. The euro held at $1.1730. The risk-sensitive Antipodean currencies crept higher, with the Aussie up 0.3% to $0.7120 and the kiwi up 0.1% to $0.6592.
The yield on benchmark U.S. 10-year government debt rose 1 basis point to 0.7536%.
Investors are awaiting minutes from the U.S. Federal Reserve’s September meeting due at 1800 GMT for guidance as to how the central bank plans to push inflation higher and how long it might let it run above 2% before tightening its ultra-loose monetary policy.
Australian government bonds rallied in anticipation of quantitative easing from the central bank and a lower cap on three-year yields, which fell to a record low of 0.138%.
On Wall Street on Tuesday the Dow fell 1.3%, the S&P 500 dropped 1.4% and the Nasdaq fell 1.6%.
A 2% jump in Alibaba on Wednesday, amid small but broad gains by China-exposed retailers and financials listed in Hong Kong further underlined the contrast between uncertainty in the United States and economic recovery in China.
Chinese stock, equity, currency and bond markets are closed until Friday for a long national holiday that is expected to drive hundreds of millions of domestic trips and a spike in consumption, which has been a weak spot.
“China is going to lead the world out of COVID the same way it led the world out of the (financial crisis),” said Jim McCafferty, Joint Head of APAC Equity Research at Nomura in Hong Kong.
“The other big market in Asia is Japan,” he said. “You’ve got political stability, stronger virus control...and 20% of Japanese earnings are coming from China - I think people are beginning to realise this.”
Japan’s Nikkei eased 0.2% on Wednesday, but has avoided the selloffs that have dragged on U.S. markets in recent weeks.
In commodity markets, oil futures gave up some of their recent gains amid supply concerns.
A larger-than-expected buildup in U.S. crude stocks had West Texas Intermediate futures down about 1.8% to $39.95 a barrel. Brent crude futures fell 1.5% to $42.03 a barrel.
Spot gold recovered slightly to $1,883 an ounce after being whacked by a rising dollar on Tuesday.
“Trump applied the salt in the gold investor’s wounds when he pinpricked the stimulus balloon,” said Stephen Innes, Bangkok-based market strategist at FX broker Axi.
Reporting by Tom Westbrook in Singapore. Additional reporting by Donny Kwok in Hong Kong and Imani Moise in New York; Editing by Sam Holmes and Kim Coghill