HONG KONG, Dec 13, 2019 (BSS/AFP) – Christmas came early to Asian markets
Friday as equities and the pound surged on reports China and the US had
reached a trade agreement and exit polls predicted a landslide election win
for British Prime Minister Boris Johnson that will allow him to push through
Brexit.
Investors flocked back into stocks around the world on news that Donald
Trump had signed off on a long-awaited pact between the world’s economic
superpowers that will see the cancellation of fresh US tariffs due at the
weekend and the rolling back of previous measures.
After months of high-level talks, negotiators presented the president with
a deal that will see China ramp up its purchases of agricultural goods,
Bloomberg News reported.
The mood was already buoyant after Trump said an agreement was close on
the first part of a wider pact.
“Getting VERY close to a BIG DEAL with China. They want it, and so do we!”
Trump tweeted earlier in the day, which helped fuel a rally on Wall Street
that saw the S&P 500 and Nasdaq hit new records.
While the pact has yet to be finalised, the news will come as a massive
relief to investors after weeks of toing and froing, with the two sides
offering sometimes positive, sometimes downbeat comments on the talks’
progress.
Trade tensions between the world’s biggest economies have been a huge drag
on global growth, with most countries being sucked into the stand-off,
sending some into or close to recession.
– Sterling surges –
The trade headlines came just as a closely watched exit poll forecast
Johnson’s ruling Conservative party would win a huge 86-seat majority in a
crucial general election.
If that is the case, then the PM will have sufficient power to finally
drive his EU Brexit deal through parliament, the stuttering passage of which
has caused years of uncertainty in Britain.
The news sent the pound briefly soaring to $1.3514 — its highest since
mid-2018 — from $1.3163 before the poll was released. It also rallied to
82.80 pence per euro — a level not seen since just after the Brexit
referendum in 2016.
“The market is getting two Christmas presents early,” said Tai Hui at JP
Morgan Asset Management.
The one-two of positive news for markets sent equities surging in Asia.
Tokyo soared 2.4 percent by the break, Hong Kong piled on 1.7 percent,
Seoul surged 1.3 percent and Sydney rose 0.5 percent. There were also big
gains in Singapore, Taipei, Manila and Jakarta.
The soothing of tensions and removal of some uncertainty helped higher-
yielding, riskier currencies rally.
The Chinese yuan jumped one percent against the dollar, while the South
Korean won and South African rand were both 1.5 percent higher.
Australia’s dollar, the Indonesian rupiah, Mexican peso and Russian ruble
also saw big advances as investors grew in confidence.
– ‘Turbo-charged boost’ –
“The global recovery (fear of missing out) trade of the last two months
got a turbo-charged boost, naturally,” said OANDA’s Jeffrey Halley.
“Stock markets leapt to record highs on Wall Street, emerging-market and
China-centric currencies have surged, as has oil. In fact, you could have
bought almost anything in the last eight hours, and it would be higher now.”
However, while the mood heading into Christmas is of optimism, Hui pointed
out there was still a long way to go on both issues.
“The UK government will need to finalise the details on Brexit and start a
marathon of trade negotiation with the EU,” he said. “This is expected to be
complicated and time-consuming, while new uncertainties could emerge for the
business sector.”
And on the China-US trade deal, “our view has always been that the two
sides would agree on phase one, but these represent some of the lowest-
hanging fruits in the negotiation.
“The future stages of negotiation is going to be much more challenging
when it starts to involve China’s industrial policy and technological
development.”
– Key figures around 0300 GMT –
Tokyo – Nikkei 225: UP 2.4 percent at 23,994.59 (break)
Hong Kong – Hang Seng: UP 1.7 percent at 27,443.61
Shanghai – Composite: UP 1.1 percent at 2,947.82
Pound/dollar: UP at $1.3478 from $1.3470 at 2200 GMT
Euro/pound: UP at 82.92 pence from 82.87 pence
Euro/dollar: DOWN at $1.1176 from $1.1177
Dollar/yen: UP at 109.55 yen from 109.30 yen
West Texas Intermediate: UP 35 cents at $59.53 per barrel
Brent North Sea crude: UP 42 cents at $64.62 per barrel
New York – Dow: UP 0.8 percent at 28,132.05 (close)
London – FTSE 100: UP 1.0 percent at 7,287.00 (close)