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Asian markets celebrate early Christmas on trade, Brexit

By AFP - Dec 14,2019 - Last updated at Dec 14,2019

A pedestrian walks past an electric quotation board displaying the numbers on the Nikkei 225 Index on the Tokyo Stock Exchange in Tokyo on Friday (AFP photo)

HONG KONG —  Christmas came early to Asian markets on 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.

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.

 

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.

The PM 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 Britain.

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 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 2.6 per cent, Hong Kong piled on more than 2 per cent, Shanghai clocked up 1.8 per cent, Seoul surged 1.5 per cent and Sydney rose 0.5 per cent. There were also big gains in Mumbai, Singapore, Taipei, Manila and Jakarta.

The soothing of tensions and removal of some uncertainty helped higher-yielding, riskier currencies rally.

The Chinese yuan jumped 1 per cent against the dollar, while the South Korean won and South African rand were both 1.5 per cent higher.

Australia's dollar, the Indonesian rupiah, Mexican peso and Russian ruble also saw big advances as investors grew in confidence.

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