World stocks have inched to a record high after the United States and China signed a deal to defuse their 18-month trade war, which has weighed on global economic growth and hampered investments.
MSCI’s broadest index of world stocks firmed 0.04 per cent in early trade after closing at record level on Wednesday while its index on Asia-Pacific shares outside Japan rose 0.10 per cent.
Japan’s Nikkei rose 0.14 per cent while Australian shares were 0.6 per cent higher.
US President Donald Trump and Chinese Vice Premier Liu He on Wednesday signed a deal that will roll back some tariffs and see China boost purchases of US goods and services by $200 billion over two years.
The deal does not address structural economic issues that led to the trade conflict, and does not fully eliminate the tariffs while the $200 billion purchase targets look daunting to achieve.
Yet it reduced uncertainties that have beset financial markets.
The S&P 500 closed at a record high of 3,289.3 points, up 0.19 per cent, with gains fairly small after the market has rallied for months on hopes of a deal.
The index was dragged down by fall in financial shares following downbeat earnings from Bank of America and Goldman Sachs.
“While the trade deal has provided a relief, there wasn’t any positive surprises for markets. For shares to rise further, we need more evidences of improvement in the real economy and earnings,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.
Bond yields dropped as a boost from the trade deal failed to offset pressure from low US producer price inflation data, which highlighted persistently low inflationary pressure.
The price index rose less than expected in December to cap 2019 with rise of 1.3 per cent, lowest since 2015.
The 10-year US Treasuries yield slipped to one-week low of 1.786 per cent compared with a high of 1.900 per cent last Thursday.
Weak inflation was evident also in UK where consumer price inflation slowed to 1.3 per cent, its slowest rate in three years.
The data fanned bets the Bank of England will cut interest rates at the end of this month, bringing Britain’s currency under further pressure briefly.
The pound last traded at $1.3040, having managed to recover a tad from its three-week low touched earlier this week.
The Swiss franc held firm, having rising to its strongest against the dollar in over a year and its highest against the euro in almost three years after the United States added Switzerland to its watchlist of currency manipulators.
Washington’s decision led traders to think it will become difficult for the Swiss National Bank to intervene to weaken the franc in the future.
The Swiss currency last stood at 0.9637 franc per dollar , near Wednesday’s high of 0.9631.
In contrast, the Chinese yuan hovered just below its 5-1/2-month high touched earlier this week after Washington dropped its currency manipulator label on China.
The offshore yuan stood at 6.8860 to the dollar, near Tuesday’s high of 6.8662.
Against the yen the dollar traded at 109.90 yen, below its near eight-month peak of 110.22 set on Tuesday.
The euro stood at $1.1152, extending its recovery from a low of $1.10855 hit last Friday.
Oil prices edged back after touching a six-week trough the previous day on data showing big increases in US refined products.
US West Texas Intermediate (WTI) crude gained 0.48 per cent to $58.09 per barrel. It had fallen to as low as $57.36 on Wednesday.