China and 14 other countries agreed on plans for what could become the world’s biggest trade agreement - the Regional Comprehensive Economic Partnership (RCEP). An agreement could not be reached with India which decided to pull from the trading bloc. The deal is expected to be signed next year and includes the 10-member ASEAN countries as well as Japan, South Korea, Australia and New Zealand. The deal will lower tariff in many areas and touches on services and on protecting intellectual property. Tariffs are agreed between the countries instead of them being standardised across the RCEP and does not include agriculture nor it provides any framework for environmental protection. The participating countries account for almost a third of the world’s GDP. India refused to join despite powerful lobbying from Japan and Indonesia on concerns that a wave of cheap good from China would be taking over its market. The Australian dollar gained over 0.2% to $0.6919 as the central bank kept to expectations by holding interest rates steady as it gauged the impact of the three cuts already delivered this year which led it to lower its growth and employment forecasts. The New Zealand dollar was last at 0.6422 recovering some previous losses.
The British pound edged higher following overnight weakness in the dollar though election-related uncertainty capped gains. Weak PMI data muted any expectations of policy changes from the Bank of England at a policy meeting this week. Construction shrank for the sixth month in a row in October - in line with expectations and reflecting a slowdown in growth due to political uncertainty before UK Prime Minister Boris Johnson’s previous Oct. 31 Brexit deadline. Against the dollar, the pound drifted 0.2% higher at $1.29 but remained well within recent ranges. Versus the euro, the pound was steady at 86.31 pence. With just over five weeks until Britain heads to the polls on Dec. 12, with the ruling Conservative party leading in the polls but without a majority which if materialised, will add to the UK’s uncertainties such hurting the pound.
Oil prices steadied as investors are waiting U.S. inventory data due later in the day, following two days of gains on positive economic data and hopes for a Washington-Beijing trade deal. Brent crude futures were flat at $62.12 after gaining 0.7% in the previous session. U.S. crude also barely moved, down 9 cents at $56.45 a barrel. The US-China deal, which may be signed later this month is expected to include a U.S. pledge to scrap planned tariffs on about $156 billion worth of Chinese imports, including cell phones, laptop computers and toys. Oil investors are also following the initial public offering of Saudi Arabia’s state oil company, Saudi Aramco, in what is expected to be the world’s biggest listing although it will be a few hundreds of billions short of the hoped $2trillion.
Asian shares continued their climb reaching six-month highs as hopes that Washington may roll back some of the tariffs it has imposed on imports from China shored up optimism throughout the continent. MSCI’s Asia-Pacific shares gained 0.5% to reach levels last seen in early May, led by strong gains in Chinese shares. FTSE-Xinhua reached 14444, not seen since April, also helped by the People's Bank of China cutting a medium-term lending rate. Taiwanese shares gained 0.4% to near three-decade highs while Nikkei reopened strongly today, rising 1.34% to a one-year peak. The bright mood in Asia is seen extending into Europe in early trade with Euro Stoxx 50 up 0.3%, German DAX gaining 0.21% higher and FTSE also on the climb, up 0.49% despite the strong pound. On Wall Street, the S&P 500 rose 0.37% to a record 3,078.27 while the Dow Jones and the Nasdaq also clinched all-time highs on hopes of a deal. In the currency market, the dollar gained 0.2% on the yen to 108.80 extending its recovery from Friday. Trade optimism kept the Chinese yuan near its highest levels since mid-August, at 7.0162 per dollar, up 0.2%. China’s central bank cut its one-year medium-term lending facility (MLF) rate by 5 basis points, for the first time since early 2016 as China’s services sector activity expanded at its slowest pace in eight months in October. The euro was little changed at $1.1126 off last week's $1.1175. Rising economic optimism hurt demand for gold, which fell 0.47% to $1,503 per ounce.