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, reports BSS/AFP.
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.
