Markets Rally as Trade and Brexit Uncertainties Recede -- Update
December 13 2019 - 4:21AM
Dow Jones News
By Steven Russolillo and Joanne Chiu
Global stocks rallied Friday as signs of progress in resolving
two major overhangs -- the U.S.-China trade spat and Brexit --
bolstered investors' risk appetite late in what is already a banner
year for markets.
Futures linked to the Dow Jones Industrial Average climbed 0.4%.
The index for blue-chip stocks gained 0.8% on Thursday after
President Trump said the U.S. and China were nearing a deal, while
the S&P 500 closed at a record high. Mr. Trump has agreed to a
limited trade agreement with Beijing that will roll back existing
tariff rates on Chinese goods and cancel new levies set to take
effect Sunday, The Wall Street Journal reported Thursday.
In the U.K., the FTSE 100 index rose over 1% after a resounding
election victory for Prime Minister Boris Johnson's Conservative
Party overnight raised hopes for a quick divorce from the European
Union. The pound rallied 0.2% against the dollar on Friday to trade
at $1.3416, its highest level since June 2018.
"The geopolitical risks thought to be strangling world economic
growth, incredibly, just in the last 24 hours, seem to be closer to
getting resolved in a big, big way," said Chris Rupkey, chief
financial economist at MUFG. "The outlook in 2020 looks better than
it has in months."
Mr. Rupkey said he expects stocks around the world to keep
rallying and bond yields to rise further.
The pan-continental Stoxx Europe 600 index advanced 1.1%.
In Asia, Japan's Nikkei 225 jumped 2.6% on Friday, putting the
benchmark on pace for one of its best days of the year. Hong Kong's
Hang Seng Index gained 2%. The Shanghai Composite in China rose
1.2%.
The WSJ U.S. Dollar Index fell 0.3%. A U.S.-China trade deal,
Britain's possible orderly exit from the EU, and looser monetary
policy in the U.S. and Europe together set the stage for a "decent
selloff" in the dollar, according to Mansoor Mohi-uddin, senior
macro strategist at NatWest Markets.
To be sure, previous breakthroughs in both trade and Brexit have
proven to be false dawns. Trade tensions have dragged on for almost
two years, while Britain's divorce from the EU has been bogged down
in the country's Parliament since the June 2016 referendum.
Still, the elevated political uncertainty, which is also fueled
by U.S. impeachment proceedings, hasn't stopped many stock markets
from enjoying an exceptional year.
The S&P 500 has rallied 26%, on pace for its best annual
performance in six years. The rally has been underpinned by the
Federal Reserve, which has cut interest rates three times this year
to shore up growth, a reversal after four increases last year.
Earlier this week, it kept rates steady and showed no appetite to
raise them soon.
The about-face has rippled through global markets. The Stoxx
Europe 600 has risen 21% this year, while indexes in mainland
China, Japan and Taiwan are up by double-digit percentages. The
MSCI All Country World index has risen more than 20%.
Some observers are concerned about how much more markets could
rally from here. Eli Lee, head of investment strategy at Bank of
Singapore, said investors should expect modest returns in the
coming years, given already-rich equity valuations. "Although the
bull market won't die in 2020, there are good reasons for return
expectations to be moderate," he said.
-- Anna Hirtenstein in London contributed to this article.
Write to Steven Russolillo at steven.russolillo@wsj.com and
Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
December 13, 2019 04:06 ET (09:06 GMT)
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