Christmas came early to Asian markets on Friday as equities and the pound surged on reports that China and the US had reached a trade agreement and British Prime Minister Boris Johnson won a landslide victory that would allow him to push through Brexit.
Investors flocked back into stocks around the world on news that US President Donald Trump had signed off on a long-awaited pact between the world’s economic superpowers that would see the cancelation of fresh US tariffs that were due today and the rolling back of previous measures.
After months of high-level talks, negotiators presented the US 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 finalized, the news came as a massive relief to investors after weeks of back and forth, 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.
“Does it mean we get a comprehensive deal in 2020? Hard to say, but it this has created the necessary Christmas cheer for a decent Santa Rally,” said Neil Wilson at Markets.com.
The trade headlines came just as Johnson’s ruling Conservative Party won a commanding majority in the British Parliament.
He is set to have sufficient power to finally drive his EU Brexit deal through Parliament, the stuttering passage of which has caused years of uncertainty in the UK.
Commentators also suggested that the large majority meant Johnson was not beholden to the extreme anti-EU members of his party and would give him the ability to push for a softer Brexit, which would be better for the economy.
“The market is getting two Christmas presents early,” said Tai Hui at JP Morgan Asset Management.
The positive news for markets sent equities surging in Asia.
The weighted index on the Taiwan Stock Exchange rose 91.31 points, or 0.77 percent, to 11,927.73, up 2.7 percent for the week.
The Nikkei 225 rallied 2.55 percent, or 598.29 points, to close at 24,023.10, the highest since early October last year. Over the week, it gained 2.9 percent.
The broader TOPIX was up 1.59 percent, or 27.15 points, at 1,739.98, and rose 1.6 percent from a week earlier.
Hong Kong’s Hang Seng gained 2.6 percent on Friday, rising 4.5 percent for the week, while the Shanghai Composite Index added 1.8 percent, up 1.9 percent for the week.
In Seoul, the KOSPI surged 1.5 percent, bringing its weekly gain to 4.25 percent.
Australia’s S&P/ASX added 0.5 percent, rising by the same percentage for the week.
India’s NIFTY 50 added 0.9 percent for the day and 1.4 percent for the week, while the SENSEX rose 1 percent on Friday, carrying its weekly gain to 1.4 percent.
The FTSE Straits Times Index on Friday rose 0.6 percent and gained by the same amount for the week.
The Philippine Stock Exchange rose 1.8 percent on Friday, up 1 percent for the week.
The Jakarta Stock Exchange on Friday rose 0.9 percent, up 0.2 percent for the week.
“The global recovery [fear of missing out] trade of the last two months got a turbo-charged boost, naturally,” Oanda Corp’s Jeffrey Halley said.
“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 said there was still a long way to go on both issues.
“The UK government will need to finalize 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.”
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,” Hui said.
“The future stages of negotiation is going to be much more challenging when it starts to involve China’s industrial policy and technological development,” he added.
Additional reporting by CNA, with staff writer
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