China's Vice-Premier Liu He, right, with US Trade Representative Robert Lighthizer, second left, and Treasury Secretary Steve Mnuchin, left, before talks at the Xijiao Conference Center in Shanghai. Photo: AFP / Ng Han Guan

Trade of the Day: Stocks and futures rise on trade deal; US Treasuries and gold prices down; oil extends gains

Quote of the Day: “What ailed global growth and trade over the past 18 months wasn’t just the trade tiff between China and the US,” said Frederic Neumann, HSBC’s co-head of Asian economics research. “It was in large part driven by the cyclical downturn in Mainland demand – something that was the result of local policy tightening, and not so much the tariffs imposed by the US. For things to snap back, therefore, from Europe to Korea, from Singapore to Australia, we’ll need China to step on the gas. And with a Phase One deal stuffed in the stocking, presumably there is now less pressure than before for China to deviate from its de-risking path. Ho, ho, ho, everybody.”

Stock of the day:  Skincare and beauty products company Water Oasis rose as much as 23% after the company declared a higher final dividend that gave a yield of 7% on Friday’s close. Total dividend for the year was 76% higher than last year.

Number of the Day:. Zero. The repo rate expected to be set by the world’s oldest central bank, Riksbank, at its meeting later this week. Sweden’s central bank, founded in 1668, will shift away from negative interest rates after five years, polled specialists anticipate. The rate is currently at minus 0.25% and such normalization would be watched by other central banks that are currently deploying negative interest rates to support their economies.

Tip of the Day:  “Scale of buyback activity in Japan will lead to upgrades in earnings estimates. We are confident that buyback activity will provide market,” Nomura joint head of APAC equity research Jim McCafferty said while delivering the outlook for 2020. He pointed out that 47% of Japan’s top 100 manufacturing companies have net cash positions (cash>debt) and share buybacks are only 1% of market capitalization. This contrasts with just 17% net cash companies in the United States where companies are borrowing to fund buybacks that already account for 4% of market capitalization.

Stocks rallied in most markets after China and United States both agreed on a phase one deal, the world’s biggest two economies agreeing to scrap tariffs on each other’s goods. China’s vice commerce minister Wang Shouwen said the two nations would protect the interests of each other’s companies in their respective countries. US Trade Representative Robert Lighthizer said the deal would also include a commitment by China not to press American companies to transfer technology. “The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of US goods and services in the coming years,” said a statement from the United States trade representative. It said the United States will be maintaining 25% tariffs on approximately $250 billion of Chinese imports, along with 7.5% tariffs on approximately $120 billion of Chinese imports.

Risk appetite also got a boost after Brexit uncertainty faded following a landside victory for Prime Minister Boris Johnson’s Conservative Party. Johnson made his first statement upon returning to Downing Street and said that his party now has “an overwhelming mandate, from this election, to get Brexit done and we will honor that mandate by Jan 31.”

MSCI Asia Pacific ex-Japan index rose 0.13% to a level not seen since mid-April; Australia’s S&P/ASX 200 soared 1.63%; but Japan’s Nikkei index fell 0.3% and Hang Seng index retreated 0.7% with insurance, banks and energy sector weighing down the benchmark.

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