Markets insights

Regional markets expected to build on recent gains

Relief for investors as US-China trade row and Brexit uncertainty appear eased for now

With both the US and China confirming terms of a Phase One trade deal, investors can take heart that the bitter relationship between the two economic powerhouses may have finally changed.

US tariffs on Chinese goods due to take effect yesterday have been scrapped and existing ones reduced in exchange for more agricultural purchases by the Chinese to go with a pledge to better protect US intellectual property.

Taken together with the Conservative Party's resounding victory in last Thursday's general elections in Britain, which provides investors assurance over Brexit proceedings, there is a sense of relief.

Trade worries and Brexit uncertainty now appear somewhat eased - at least in the near future - and market watchers are expecting equity markets in Asia to continue to build on recent gains.

In the United States, investors were largely unmoved by the long-awaited US-China trade deal, with the benchmark Dow Jones Industrial Average closing essentially flat at 28,135.38.

But in Britain, the pound surged and stocks rallied as investors cheered Prime Minister Boris Johnson's landslide win.

The FTSE 250 soared as much as 5.4 per cent before closing 3.4 per cent higher. The FTSE 100 Index, dominated by exporters and therefore vulnerable to the strength of the pound, rose 1.1 per cent.

One trader told The Business Times: "In the latter half of last week, markets began pricing in the effects of the mini trade deal, but did so cautiously given the unpredictable nature of the US-China relationship. We might now see the shackles come off, with risk-friendly activity taking the lead to close the year out."

There is another constructive development on this front too.

STILL IN THE WORKS

Trade negotiations will continue; for now, escalation seems to be off the table, but the path to a grand deal is still miles away.

MR STEPHEN INNES, AxiTrader chief Asia market strategist, on the ongoing trade talks between the US and China.

US President Donald Trump last Friday said groundwork for a follow-up deal, which might cover thornier issues between the US and China, will begin immediately instead of until the US presidential elections are over next November.

AxiTrader chief Asia market strategist Stephen Innes said: "Trade negotiations will continue; for now, escalation seems to be off the table, but the path to a grand deal is still miles away."

Last Friday, Singapore's Straits Times Index (STI) extended gains from the previous session to close the week at 3,214.05, breaching the 3,200-point resistance after a 19.38 point, or 0.6 per cent, jump.

On the week, the blue-chip index added 19.34 points or 0.6 per cent from Dec 6's close of 3,194.71.

It will be a quiet week for economic data releases in Singapore, with just last month's non-oil domestic exports (Nodx) report due tomorrow.

With Singapore's manufacturing sector likely to have bottomed out, a Bloomberg consensus has Nodx gaining 5.9 per cent from October. Year on year, Nodx is estimated to have fallen 5 per cent from November last year.

Elsewhere in the region, China's industrial production and retail sales figures for last month will be released today, as will Indonesia's trade data from last month.

Among regional central banks, the Bank of Thailand (BOT) has a monetary policy decision on Wednesday.

to stand pat, with the benchmark interest rate remaining at 1.25 per cent. "While downside risks to both growth and inflation remain, we expect the BOT to take cues from data in the coming months to decide if one more cut should be made," Citi said.