World stocks rally on China-US trade; pound slides on UK turmoil

The pound has been on a rollercoaster as Prime Minister Theresa May delayed a parliamentary vote on her Brexit agreement and now faces a leadership challenge (AFP pic)

LONDON: Global stock markets rallied Wednesday on upbeat China-US trade news, while the pound hit yet another 20-month low as British Prime Minister Theresa May faces a no-confidence vote.

Oil prices jumped one dollar as volatility continued to grip world crude markets.

A flurry of positive developments in the tariffs stand-off between the world’s top economies provided early Christmas cheer on trading floors, fuelling hopes an all-out trade war can be avoided.

In afternoon deals, Frankfurt fizzed 0.9% higher, London won 1.1% and Paris added 1.6%.

The positivity spilled over from Asia, where Tokyo ended 2.2% higher and Shanghai rose 0.3%, while Hong Kong jumped 1.6%.

“The equity markets are taking encouragement from recent reports of a potential truce in the US-China trade dispute,” noted VTB Capital analyst Neil MacKinnon.

Canada on Tuesday released on bail Meng Wanzhou, chief financial officer (CFO) at Chinese telecoms giant Huawei, whose arrest last week sparked fury in Beijing and worries about a truce agreed at the G20 by Donald Trump and Xi Jinping this month.

Providing some extra support to the news of Meng’s release was an interview in which Trump said he could intervene in the case if it helps seal a trade pact with China, adding: “Whatever’s good for this country, I would do.”

China added to market-friendly noise by saying it had agreed to cut tariffs on US autos to 15% from 40% — wiping out a levy imposed earlier this year in response to US measures.

Investors welcomed the headlines but sounded a note of caution.

“Newsflow regarding developments in the US-China trade dispute has been notoriously erratic and positive news can quickly give way to negative news,” added MacKinnon.

May no-confidence vote

The British pound meanwhile ducked as low as $1.2478 — a level last seen in April 2017 — in a torrid week for the Brexit-hit currency.

The latest low came as the head of a Conservative Party committee in charge of organising leadership challenges announced that May would Wednesday face a no-confidence vote over her Brexit negotiations.

The weak pound boosts London-listed multinationals whose earnings abroad are converted back into sterling, handing a fillip to the FTSE 100 shares index.

The news came after May had delayed Tuesday’s parliamentary vote on her EU divorce agreement to avert a crushing defeat.

In midday deals, sterling clawed background to stand at $1.2534, up from $1.2487 late on Tuesday.

“So far sterling has played the waiting game in regards to the impending vote of no-confidence in Theresa May,” noted Spreadex analyst Connor Campbell.

“If the prime minister comes out the other side with her job intact, then it takes one of the many uncertainties that have swirled around UK politics for the last few months off the table.

“If she loses, on the other hand, then well, the pound’s likely going to have a very unpleasant run-in to Christmas.”