Asian markets rise to 17-month peak

Sydney — Asian shares rose to their highest in more than a year on Tuesday, as trade deal optimism and Wall Stree’s run to highs supported sentiment, while familiar fears of a hard Brexit knocked the pound.

The mood carried MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.6% to its highest since July 2018. Japan’s Nikkei hit its firmest in more than year, Hong Kong’s Hang Seng rose almost 1%.

Korea’s Kospi stood at its highest since May and Shanghai blue chips rose 0.6%, while Australia’s S&P/ASX 200 eked a tiny extension to Monday’s big gains.

Bond markets, currencies and commodities were more circumspect, and futures trade pointed to softness in Europe and a flat open the US after a bumper Monday.

“As long as volatility remains low, momentum is probably continuing, despite the amazing year-to-date gains,” said Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore.

“The risk is that nobody thinks that there’s anything left for the year, they’re all thinking 2020.”

The preliminary deal between Washington and Beijing will double US exports to China, White House adviser Larry Kudlow said on Monday. The US will reduce some tariffs on Chinese goods under the agreement.

It is not yet signed, and the Chinese side have been more circumspect in their praise, but US trade representative Robert Lighthizer said over the weekend it is “totally done”.

The three US stock indices rose modestly, but posted record closing highs. So did the pan-European Stoxx 600 index.

The Dow Jones Industrial Average rose 0.4%, the S&P 500 added 0.7% and the Nasdaq almost one percentage point. For the year to date, the Nasdaq has increased its value by a third, while the other indices are up by more than 20%.

In Britain, the FTSE 100 had its biggest daily gain in almost a year. But after the closing bell some familiar fears returned.

ITV reported Prime Minister Boris Johnson would use his majority to reinstate a hard deadline for leaving the EU at the end of next year, again raising the spectre of a chaotic “hard” Brexit.

Sterling fell 0.6%, before recovering slightly.

Elsewhere currency markets were more pensive in the absence of many of the fine details of the trade deal. The US dollar recouped some of Monday’s losses, though moves were modest.

“Well, yeah, they’ve agreed a phase one deal, but what’s actually in it?” asked Westpac analyst Imre Speizer.

“Equity markets just want to rally, so they’ll pick on anything that seems remotely positive, but the other markets are maybe a little more thoughtful about exactly what’s going on.”

Several Chinese officials said the wording of the agreement remained a delicate issue and care was needed to ensure expressions used in text did not re-escalate tensions.

Still, trade optimism kept the Chinese yuan on the strong side of seven per dollar.

The Australian dollar drifted lower as minutes of the central bank’s December policy meeting showed it was open to monetary easing in February if the outlook deteriorated.

Brent crude held steady at $65.32 a barrel, after climbing on Monday. Spot gold was flat at $1,475.26 an ounce.

Reuters