Global markets end the year largely up on US-China trade deal

Shanghai — A broad gauge of Asian share markets rose to the highest in 18 months on Monday as Chinese equities gained, while oil hovered near three-month highs on a combination of US crude inventory drawdowns, trade optimism and unrest in the Middle East.

MSCI’s broadest index of Asia-Pacific shares excluding Japan was last up 0.2%, turning around from an earlier loss. The index rose to its highest since June 19 2018.

Chinese blue chips, which had started the day lower, were up 1.24% at the midday break, bolstered by a report that 2019 retail sales are forecast to rise 8% and expectations that a new benchmark for floating-rate loans could lower borrowing costs and boost flagging economic growth.

However, Australian shares remained down 0.44% as investors continued to consolidate recent gains. Japan’s Nikkei stock index slid 0.58%.

Easing trade war worries and reduced uncertainty over the UK’s plans to leave the EU after British elections returned a strong Conservative majority have lifted global equities in December, helping the broad MSCI Asia index rise more than 6% and putting it on track for its strongest month since January.

Kay Van-Petersen, global macro-strategist at Saxo Capital Markets, said that limited liquidity near the year-end and the easing of US-China trade and Brexit uncertainties has “just left us drifting up higher. So even if there is a pullback … I don’t think it’s going to be significant by any means”.

Global equity markets gained late last week, with the S&P 500 and the Dow Jones Industrial Average closing at records on Friday. The Dow ended 0.08% higher at 28,645.26 and the S&P edged up just 0.11 points to 3,240.02. The Nasdaq Composite lost steam at the close, falling 0.17% to 9,006.62.

Oil also gained on Friday, with prices posting their fourth consecutive weekly gain to steady around their highest in three months. On Monday, global benchmark Brent crude was up 0.18% to $68.28 a barrel, while US West Texas Intermediate (WTI) crude added 0.05% to $61.75, reversing an earlier decline.

Oil’s gains followed news of US air strikes in Iraq and Syria against Kata’ib Hezbollah, an Iran-backed militia group. US officials said on Sunday that the attacks were successful, but warned that “additional actions” may be taken to defend US interests.

However, Stephen Innes, strategist at AxiTrader, said that the rise of shale oil production in the US would offset any geopolitical risks. “Shale can really ramp up more volumes to accommodate any shortfall that could possibly be triggered by escalation in Syria,” he said, adding that an upsurge in populism in Iraq poses a larger risk to markets.

Iraq’s oil ministry said on Sunday that the halting of oil production at Iraq’s southern Nassiriya oilfield by protesters would not affect the country’s exports and operations.

Gold also continued its run-up, after posting its best week in more than four months on Friday amid thin trading volumes, in a sign that some investors continue to see risks to global growth and US-China trade. On Monday, gold rose 0.33% to $1,515.40 an ounce on the spot market.

In the currency market, the dollar was 0.30% lower against the yen at ¥109.08 and the euro was up 0.27% on the day at $1.1194. The dollar index, which tracks the greenback against a basket of six major currencies, was down 0.2% to 96.736.

The yield on benchmark 10-year US treasury notes was at 1.8752% compared with its US close of 1.873% on Friday, while the two-year yield edged down to 1.5832% compared with a US close of 1.589%. 

Reuters