Global markets mostly higher on optimism about US-China deal

TOKYO (AP) — Global shares were mostly higher on optimism about a United States (US)-China trade deal as regional markets opened the new year’s first day of trading yesterday.

France’s CAC 40 rose 0.8 per cent to 6,022.63 in early trading, while Germany’s DAX was little changed, inching down less than 0.1 per cent to 13,238.78. Britain’s FTSE 100 added 0.8 per cent to 7,604.80. US shares were set to drift higher with Dow futures gaining 0.4 per cent to 28,634. S&P 500 futures were also up 0. per cent at 3,243.80.

Australia’s S&P ASX 200 gained 0.1 per cent to 6,690.60, while South Korea’s Kospi lost 1.0 per cent to 2,175.17. Hong Kong’s Hang Seng jumped 1.1 per cent to 28,511.92, while the Shanghai Composite gained 1.2 per cent to 3,085.20. Tokyo was still closed for the New Year’s holiday.

Regional market sentiment has been on an upswing after US President Donald Trump said an initial trade deal with China would be signed later this month.

The ‘Phase 1’ trade deal calls for the US to reduce tariffs and China to buy larger quantities of US farm products.

Chief Executive of the Korea Exchange Jung Ji-won; and Financial Services Commission Chairman Eun Sung-soo applaud with other participants during the opening of this year’s trading in Seoul, South Korea yesterday. The sign read ‘Opening ceremony of 2020 trading’. PHOTO: AP

Weighing on the optimism was an announcement earlier in the week from North Korean leader Kim Jong-un that his country will soon reveal a new strategic weapon and that North Korea was no longer obligated to maintain a self-imposed suspension on the testing of nuclear weapons and intercontinental ballistic missiles.

But some market observers said Kim’s comments were not specific enough to dampen optimism. “The clear lack of details on both the threat itself and the timing, over and above the evident desensitised state of the market in previous tests, underpins this lack of reaction,” said Market strategist at IG in Singapore Jingyi Pan.

Adding to the optimism was China’s central bank announcement on Wednesday it will cut the amount of money banks will be required to have on hand from January 6 in an effort to boost the slowing economy.

The People’s Bank of China said the reserve requirement ratio for financial institutions would be lowered by 50 basis points, a move that’s expected to release about CNY800 billion (USD114.6 billion) into the economy for lending purposes.

That will boost the economy ahead of the Lunar New Year that falls on January 25. Companies and individuals typically need large amounts of cash on hand during China’s most important annual holiday to pay bonuses, clear debts and cover other expenses.

On Tuesday, the last day of trading for 2019, the S&P 500 rose 9.49 points, or 0.3 per cent, to 3,230.78. The Dow gained 76.30 points, or 0.3 per cent, to 28,538.44. The Nasdaq climbed 26.61 points, or 0.3 per cent, to 8,972.60.

The Russell 2000 index picked up 4.32 points, or 0.3 per cent, to 1,668.47. The index ended the year with a gain of 23.7 per cent.

Wall Street closed the books on a blockbuster 2019 for stock investors, with the broader market delivering its best returns in six years.

The S&P 500 finished with a gain of 28.9 per cent for the year, or a total return of 31.5 per cent, including dividends.

The Nasdaq composite rose 35.3 per cent. For both indexes it was the best annual performance since 2013.

Technology stocks helped power those gains by vaulting 48 per cent. The Dow Jones Industrial Average gained 22.3 per cent, led by Apple.

ENERGY: Benchmark US crude oil gained 27 cents to USD61.33 a barrel. It lost 62 cents to settle at USD61.06 per barrel on Tuesday. Brent crude, the international standard, rose 36 cents to USD66.36 per barrel.

CURRENCIES: The dollar rose to JPY108.81 from JPY108.53. It edged down to USD1.1209 from USD1.1231.