Asian shares gain ground amid hope of a trade deal

Sydney/Tokyo — Asian stocks gained on Friday as investors took heart from US President Donald Trump saying trade talks with China were “moving right along”, and US oil prices sat near two and a half month highs after the Organization of the Petroleum Exporting Countries (Opec) and other producers agreed to cut output.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.5% and Japan’s Nikkei added 0.3%.

Australian shares rose 0.2% and South Korea’s Kospi climbed 0.8% while China’s Shanghai Composite and Hong Kong’s Hang Seng indices gained 0.1% and 0.9%, respectively.

Trump’s upbeat tone in comments on Thursday was enough to spark buying, despite a lack of agreement between Washington and Beijing over whether existing tariffs should be dropped as part of a preliminary deal to end their trade war.

“Many players have taken a wait-and-see attitude given a lack of fresh trading cues ahead of US payrolls data and the Federal Reserve’s policy meeting. But clearly, the mood is quite positive,” said Yasuo Sakuma, chief investment officer at Libra Investments.

Investors were hoping that the two sides will reach a compromise to at least avoid their worst fears — that the US will go ahead with its final batch of tariffs on about $156bn of Chinese exports.

Uncertainties over a deal have pushed some investors to the sidelines in recent sessions, while nervousness before the release of US non-farm payrolls data later in the day could also curb market liquidity.

Investors were also looking ahead to a Fed policy meeting on December 10-11. A Reuters poll of economists and analysts showed the Fed would keep rates on hold at 1.50%-1.75%.

Oil prices retreated but hovered near recent peaks after major oil exporting countries agreed on Thursday to cut output by an extra 500,000 barrels per day in the first quarter of 2020, after a nearly six-hour meeting on Thursday.

Details of the agreement and how the cuts will be distributed among producers still need to be ratified at a meeting in Vienna of Opec and non-Opec nations, otherwise known as Opec+, on Friday.

“The cut of an extra 500,000 barrels a day was not priced into the market, so the cut will be positive for the market if it is carried out,” said Tatsufumi Okoshi, senior commodity economist at Nomura.

“But since Opec countries haven’t fully complied with the existing cut, markets will probably have to wait to see how the cut will pan out,” he added.

Brent crude futures dipped 0.3% to $63.20 a barrel, having struck its highest on Thursday since November 28, while US West Texas Intermediate (WTI) crude eased 0.2% to $58.31 per barrel, but was not far off Thursday’s two and a half month high of $59.12.

The agreement coincided with the initial public offering (IPO) of state oil firm Saudi Aramco, which was priced at the top of its range, raising $25.6bn in the world’s biggest IPO.

In the currency market, the British pound soared on growing confidence that next week’s election will give the Conservative Party the parliamentary majority it needs to deliver Brexit, ending near-term uncertainty.

Sterling spiked to a seven-month high of $1.3166 on Thursday and last stood at $1.316, up 1.6% so far this week. It hit two and a half year highs vs the euro.

The euro stood at $1.1108, near a one-month high of $1.11165 set on Wednesday, lifted by firmer eurozone economic data.

That helped push the dollar index to a one-month low of 97.356 on Thursday. The index last stood at 97.369.

Against the yen, the dollar traded at 108.72/¥, having slipped slightly the previous day.

Reuters