Asian shares jump on 'very good' trade talks, pound edges up

Rocio Higuera, Periodista Rocio Higuera
Japão se prepara enfrentar gigantesco tufão Hagibis

SHANGHAI (Reuters) – Asian shares jumped on Friday after U.S. President Donald Trump said he would meet with China’s top trade negotiator, stirring hopes for an agreement, while sterling resumed its climb amid optimism over a possible Brexit deal.

FILE PHOTO: An investor looks at an electronic board showing stock information at a brokerage house in Shanghai, China September 7, 2018. REUTERS/Aly Song European shares were mostly expected to continue the rally. Pan-region Euro Stoxx 50 futures STXEc1 rose 0.26% to 3,494 and German DAX futures FDXc1 gained 0.29% to 12,209. FTSE futures FFIc1 were down 0.43% at 7,142.5 early in the day.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1.3% on Friday afternoon in Asia. S&P e-mini futures ESc1 added 0.45%.

Australian shares climbed 0.9%, while Japan‘s Nikkei stock index .N225 gained 1.1%. Chinese blue-chips .CSI300 were up nearly 1% after a slow start.

The bullish market mood came after a first day of trade talks between top U.S. and Chinese negotiators, characterized by Trump as “very, very good.”

A White House official said the talks had gone “probably better than expected” and a U.S. Chamber of Commerce official briefed by both sides raised the possibility of a currency agreement this week.

Even before Trump‘s comments, hopes for an agreement helped to lift U.S. markets. The Dow Jones Industrial Average .DJI added 0.57%, the S&P 500 .SPX gained 0.64% and the Nasdaq Composite .IXIC rose 0.6%.

But while optimism around trade talks helped to drive a “classic risk-on session” overnight, the lack of runaway enthusiasm reflected broader investor caution, said Matt Simpson, senior market analyst at GAIN Capital in Singapore. “We know that it’s just a few words from Trump.”

Further positive developments in trade talks could boost markets on Monday, but low expectations for a deal mean that the lack of an agreement would not “necessarily (be) the end of the world for risk,” he added.

Analysts at National Australia Bank said freezing tariffs at current levels would be unlikely to reverse the trade-driven slowdown in economic growth.

The uncertainty around unresolved structural issues such as IP (intellectual property) theft and subsidies to state owned enterprises are likely to remain deterrents for a pick-up in much needed capital expenditure. On this score details on a potential currency pact will be important,” they said in a morning note.

On Friday, the dollar was little changed against the yen at 107.98 JPY= , while the euro gained 0.1% to buy $1.1017. The pound, which had earlier given up some of the previous day’s gains, turned higher, adding 0.1% to $1.2455.

The dollar index .DXY, which tracks the greenback against a basket of six major rivals, was down at 98.636 after posting its biggest daily drop in five weeks on waning safe-haven demand for the currency.

The British pound had jumped nearly 2% on Thursday, its biggest daily gain since March, after Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October after what he called a very positive meeting with his British counterpart, Boris Johnson.

The move away from safe havens also lifted the yield on benchmark 10-year Treasury notes US10YT=RR to 1.6699% compared with a U.S. close of 1.656% on Thursday. Yields rose across the curve, with two-year notes US2YT=RR yielding 1.5486% compared with a U.S. close of 1.53%.

In commodity markets, oil prices extended gains on news of an explosion on an Iranian tanker in the Red Sea. Prices had climbed earlier after the head of OPEC said the organization could take action to balance oil markets, including a deeper cut in oil supplies, and amid hopes that progress toward ending the U.S.-China trade war could help to revive economic growth and lift fuel consumption.

Global benchmark Brent crude LCOc1 was up around 2% at $60.29 per barrel.

Gold, which had found its appeal tarnished by rising risk appetite, recovered some ground, with spot gold XAU= trading up 0.1% at $1,495.63 per ounce.

Editing by Jacqueline Wong & Simon Cameron-Moore