Stocks tick up on upbeat China factory reports, trade talk hopes

Reuters TOKYO | Updated on December 02, 2019 Published on December 02, 2019

Global shares shuffled marginally higher on Monday to stand just short of the record peak struck in January 2018, with buyers encouraged by upbeat China manufacturing surveys and hopes that China and the US will agree to a preliminary trade deal.

As of 0550 GMT, MSCI's broadest gauge of world shares ticked up 0.1 per cent. US stock futures gained 0.31 per cent to near record highs after a dip in a truncated US session on Friday due to a Thanksgiving holiday.

European stocks are expected to post modest gains at open, the pan-European Euro Stoxx 50 futures were up 0.19 per cent. German DAX futures rose 0.21 per cent, while the FTSE futures inched up 0.13 per cent.

MSCI's index of Asia-Pacific shares outside Japan was up 0.24 per cent, reclaiming some of its loss on Friday, while Japan's Nikkei jumped 1.01 per cent.

Mainland Chinese shares also went higher, with the bluechip CSI300 index rising as much as 0.68 per cent from a three-month low hit on Friday, before paring gains to stand 0.16 per cent higher.

The market enjoyed a boost after the Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) index rose to 51.8 in November from 51.7 in the previous month, marking the fastest expansion since December 2016.

“Output and new orders are both strong. The survey seems to suggest domestic demand is pretty strong even if one cannot have unrestrained optimism on the economic outlook,” said Naoki Tashiro, president of T.S. China Research.

While US legislation supporting Hong Kong protesters last week raised concerns about US-China trade negotiations, investors are nonetheless holding the broad view that a further escalation in the trade war can be avoided.

“It looks a bit difficult for two countries' leaders to shake hands and sign a deal this month. What is more likely is to essentially kick the can, with China buying more US farm products, while the US postpones its next tariffs,” said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui Trust Asset Management.

“Markets will consider such an arrangement as a de facto deal whether they officially sign it or not,” he said.

Investors have long thought that the US will avoid imposing an additional 15 per cent tariff on about $156 billion of Chinese products on December 15 after signing a deal with China.

The two countries have so far been unable to bridge the gap over existing tariffs on Chinese goods, with Beijing demanding scrapping them as a part of any trade deal.

A trade deal between the US and China was now “stalled because of Hong Kong legislation”, news website Axios reported on Sunday, citing a source close to US President Donald Trump's negotiating team.

China's Foreign Ministry last week lambasted US legislation signed by President Donald Trump on Wednesday backing protesters in Hong Kong as a serious interference in Chinese affairs.

In the currency market the yen weakened, helped also by expectations that Japan could put together a large-scale fiscal spending package to bolster its economy. The dollar rose 0.23 per cent to 109.62 yen, hitting a six-month high of 109.73 earlier. The euro stood little changed at $1.10175, bouncing back from a seven-week low of $1.0981 hit in US trade.

The British pound slipped 0.22 per cent to $1.2914 after opinion polls during the weekend showed Prime Minister Boris Johnson's Conservative Party saw its lead over the opposition Labour Party narrow.

Oil prices bounced back a tad after a big slump on Friday on record high US crude production.

The market drew support from expectations that OPEC and its allies are likely to extend existing oil output cuts when they meet this week , with non-OPEC oil producer Russia supporting Saudi Arabia's push for stable oil prices amid the listing of state oil giant Saudi Aramco.

Iraq's oil minister said on Sunday that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd.

Brent crude futures rose 1.41 per cent to $61.34 a barrel while US West Texas Intermediate (WTI) crude gained 1.78 per cent to $56.15 per barrel.


Published on December 02, 2019
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