Australia

The Australian share market is expected to open higher after the announcement of a “phase one” US-China trade deal at the end of last week.

At 7am Sydney time, the SPI200 futures contract was up 39.0 points, or 0.58 per cent, at 6,782.0, suggesting a rise for the benchmark S&P/ASX200.

The Australian share market closed higher on Friday, with mining stocks rallying on news that the US would roll back tariffs on China as part of an interim trade deal.

The benchmark S&P/ASX200 index closed on Friday up 30.9 points, or 0.46 per cent, to 6,739.7 points, while the broader All Ordinaries was up 33.8 points, or 0.5 per cent, to 6,844.6 points.

On Wall Street on Friday, the Dow Jones Industrial Average finished unchanged, the S&P 500 was also unchanged and the tech-heavy Nasdaq Composite was up 0.20 per cent.

US Trade Representative Robert Lighthizer said overnight that the partial agreement is “totally done” but there was still a need for translation and revisions to the text.

The Aussie dollar is buying US68.89 cents from US69.24 cents on Friday.

Asia

China’s yuan rallied to a 4½-month high against the US dollar while mainland and Hong Kong stock markets soared on reports the US and China had agreed to reduce existing tariffs and delay ones set to take effect this weekend.

The US has reached a “phase one” trade deal in principle with China, a source briefed on talks between the two nations told Reuters on Thursday, adding that a statement from the White House was expected soon.

But the absence of official confirmation of a deal from either side raised questions over whether the world’s two biggest economies can secure a truce in their trade war before a new round of tit-for-tat tariffs takes effect on Sunday.

Investors were emboldened enough to bet on a positive outcome to the talks, lifting the benchmark Shanghai Composite Index 1.78 per cent to 2,967.68 - its biggest daily gain in more than 2½ months and the highest close since 7 November.

The blue-chip CSI300 index had its best day since 19 August, closing up 1.98 per cent at 3,968.22, the highest since 8 November.

Hong Kong’s Hang Seng index finished up 2.57 per cent, its strongest daily performance since 4 September and at its highest close in more than five weeks. The China Enterprises Index rose 2.1 per cent.

Japan’s Nikkei share average jumped to a 14-month high on Friday, boosted by gains in value stocks such as banks and steelmakers on hopes of a US-China trade deal heralding robust global growth.

The Nikkei 225 index surged 2.55 per cent to end at 24,023.10, hitting its highest levels since October last year and marking its biggest daily gain in 10 months.

Europe

A breakthrough in US-China trade talks and hopes of an orderly Brexit after a landslide election victory for UK Prime Minister Boris Johnson lifted Europe’s benchmark share index to within striking distance of an all-time high on Friday.

The pan-European STOXX 600 closed up 1.1 per cent, buoyed by the major step forward in resolving a trade war that has hit global supply chains and roiled markets for over 16 months.

The UK-focused FTSE mid-cap index jumped 3.4 per cent, after touching a record high earlier in the session, as the Conservative Party’s election win raised hopes Johnson will deliver Brexit within weeks, ending 3½ years of uncertainty and fears of a disorderly break with the EU.

The benchmark European index closed just shy of a record high hit in 2015. It is also on track to end the year more than 20 per cent higher, its biggest annual gain in a decade.

But, stocks pared some early gains as investors took in the trade news with caution, as the deal is yet to be signed.

Export-reliant German stocks closed up 0.5 per cent well-off session highs, held back also by a 3.7 per cent slump in Henkel as it warned of a dip in operating margin at its adhesives business next year.

London’s blue-chip FTSE 100 advanced 1.1 per cent as gains in banks and consumer goods helped the export-heavy index shrug off the impact of a surge in sterling, which typically weakens sentiment towards internationally focused companies.

The European travel and leisure index added 3.6 per cent, boosted by rallies in Brexit-sensitive airline stocks such as easyJet, International Consolidated Airlines Group, and Ryanair Holdings.

Dublin’s ISEQ, also considered a barometer of Brexit sentiment, jumped to a 12-year high.

Italian shares, however, closed 0.3 per cent lower, as the banking index dropped 1.4 per cent to log its worst day in a month. Prime Minister Giuseppe Conte said there was no need for state to help any Italian bank at present.

In corporate news, Delivery Hero gained more than 23.3 per cent as it agreed to buy South Korea’s top food delivery app operator Woowa Brothers for $4 billion and form a joint venture.

North America

US President Donald Trump’s limited trade deal with China removes a major hurdle for Apple and other technology stocks that have already surged this year to record highs.

The so-called Phase One deal announced, but still not signed, on Friday suspends the planned imposition of new 15 per cent tariffs on Sunday that would have hit $160 billion in Chinese consumer goods just weeks before Christmas, including $115 billion worth of iPhones, laptops and other electronics.

The deal would also see the United States reduce existing tariffs on other goods. China has agreed to boost imports of US energy, pharmaceutical and agricultural products, although Chinese officials offered no details on the amount of US goods Beijing had agreed to buy.

If it is signed, Trump’s long-awaited deal will be a relief to Apple, among the US companies with the most to lose in the trade war between the world’s two largest economies, along with chipmakers who make the components in its devices, which are mostly made in China.

Ives estimated that the tariffs that would have hit iPhone imports on Sunday would have clipped about 4 per cent, or 50 cents, off of Apple’s 2020 earnings per share.

Even amid trade uncertainty, Apple surged over 70 per cent this year to all-time highs on broad investor confidence in recent months that Washington and Beijing would eventually strike a deal. Apple’s stock has also benefited from progress increasing its services revenue as it diversifies from declining iPhone sales.

Confidence the trade war would be settled has also pushed the S&P 500 up 26 per cent in 2019 and fuelled a 44 per cent rally in the information technology sub-index.

Still, Investors are divided over whether Trump’s trade deal is fully priced into the market, or whether shares of Apple, its suppliers, like Qorvo and Skyworks Solutions, and other US technology and trade-sensitive stocks have room to rise.

The S&P 500 edged up 0.01 per cent on Friday to close at its second record high in two days, while Apple rose 1.36 per cent to an all-time high. Chip stocks including Qorvo and Advanced Micro Devices sold off from recent record highs.

Reflecting Wall Street’s mostly upbeat view toward Apple, BofA Global Research analyst Wamsi Mohan on Wednesday raised his price target on the company, predicting the eventual rollout of 5G would drive three years of robust iPhone sales.

The Philadelphia Semiconductor Index has surged 56 per cent in 2019, as the rollout of 5G wireless technology appeared likely to end a downturn in global chip demand and on confidence the trade war would be resolved. The global chip market is set to recover by 5.9 per cent in 2020 after shrinking 12.8 per cent this year, according to a forecast by World Semiconductor Trade Statistics.

But gains in technology stocks have stretched their earnings multiples, increasing the risk should their bottom lines not grow next year as much as expected, or should Trump’s trade deal sour. The S&P 500 information technology sector is trading at over 20 times expected earnings, its highest multiple since 2005, according to Refinitiv.

Earnings for the tech sector are expected to grow by about 10 per cent next year after falling 1 per cent in 2019, according to Refinitiv’s I/B/E/S data. That is mostly in line with broader expectations for the S&P 500, with analysts predicting around 10 per cent profit growth next year, up from 1 per cent in 2019.