Asia Markets: Asian stocks rally on apparent U.S.-China trade progress

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Asian stock markets jumped Friday, reacting to U.S. market gains and general bullish sentiment as talk of a China-U.S. trade deal buoyed share prices.

Currency markets were also in play with the British pound surging as exit polls indicated a resounding election victory for Prime Minister Boris Johnson’s Conservative Party.

Japan’s Nikkei NIK, +2.40%   rose 2.5%, while Hong Kong’s Hang Seng Index HSI, +2.06%   was up 2%. The Shanghai Composite SHCOMP, +1.24%  advanced 1.2%, while the Shenzhen Composite 399106, +1.02%   also gained.

South Korea’s Kospi 180721, +1.31%   rose 1.4%, while benchmark indexes in Taiwan Y9999, +0.85%  and Singapore STI, +0.50% tracked the up-move in the region. Australia’s S&P/ASX 200 XJO, +0.48%   tacked on 0.5%.

U.S. stocks surged to new records Thursday propelled by reports the U.S. and China had reached a trade deal to avoid new tariffs due on Sunday and could possibly roll back existing levies, in exchange for China’s purchases of American agricultural products.

The Dow Jones Industrial Average DJIA, +0.79% closed 220.75 points, or 0.8% higher, at 28,132.05, just shy of a new all-time high. The S&P 500 index SPX, +0.86% gained 26.95 points, or 0.9%, to close at 3,168.58, and the Nasdaq Composite Index COMP, +0.73% added 63.27 points, or 0.7%, to 8,717.32, both new records.

President Trump said on Twitter Thursday that the U.S. and China were nearing a “big deal” that could avoid fresh tariffs that were marked to go into effect Sunday.

An earlier report from the Wall Street Journal indicated U.S. trade negotiators had offered to cancel new China tariffs and reduce existing levies on Chinese goods by up to 50% on $360 billion worth of imports.

“If we do see the tariffs removed, that’s saying, ‘OK, China must be agreeing to things or we must be right there,’” said Ben Phillips, chief investment officer at EventShares. “That’s why the market is looking at tariffs as the bellwether to a trade deal.”

Market optimism came after the Federal Reserve left interest rates unchanged on Wednesday while expressing confidence in U.S. economic health.

Similarly, on Thursday the European Central Bank decided to keep its main deposit rate at negative 0.5%, while maintaining its rate of asset purchases at €20 billion a month, as widely expected by analysts.

In the U.K. election, Boris Johnson and his Conservative party appeared headed for the biggest win since Margaret Thatcher, according to exit polls. Exit polls have been correct in four of the five last national elections save for 2015.

The pound surged around 2% to $1.346 after the poll.

Projections showed Conservatives likely to win a solid majority of seats in Parliament. That would alleviate uncertainty by giving Johnson more political capital to push for the U.K.’s departure from the 28-nation European Union by the end of January, according to a research note by Evercore analysts.

“This is the most positive near-term outcome for markets,” Evercore analyst Krishna Guha wrote in the note.

Benchmark crude oil CLF20, +0.49%   gained 35 cents to $59.53 per barrel in electronic trading on the New York Mercantile Exchange.

The dollar USDJPY, +0.27%   rose to 109.60 Japanese yen from 109.32 yen Thursday.

The Associated Press contributed.