US-China trade deal to give fillip to global equities

Global stocks markets, especially in Asia and Europe, will open on a bullish note after US-China moved closer to finalising parts of the trade deal. The US equity markets flirted with records after announcement of US-China reaching closer to first phase deal. But Asian and most of the European markets were closed before the announcement.

The S&P 500 clinched its second highest close in history on Friday while Dow Jones Industrial Average closed less than 1.5 per cent below its record close after encouraging signs in corporate results. S&P 500 rose 0.4 per cent to 3,022 while Dow gained 0.6 per cent o close at 26,958 on Friday. Nasdaq also jumped 0.7 per cent to 8,243. FTSE 100 was down 0.1 per cent to 7,324 while Frankfurt, Paris, Euro Stoxx, Tokyo and Shanghai rose while Hong Kong and London indexes dropped at the close on Friday.

Though the US markets have, to some extent, already factored in trade deal, but markets across Asia and Europe are expected to open on a bullish note and likely to trade positively in the coming days on the back of Fed rate cuts, USChina trade deal, more clarity on Brexit issue and some good corporate results.

Timothy Fox, head of research and chief economist at Emirates NBD Research, said some of the sting appears to be going out of the US-China trade talks.

"Both sides certainly seem keen to play up the progress being made, probably for domestic political reasons in the US case as Trump faces impeachment proceedings and following a number of foreign policy blunders. China for its part has to contend with a sharply slowing economy with real GDP growth in third quarter posting just 6 per cent, the weakest expansion in some thirty years. Thus it is probably in both parties' interests to accentuate the positive for the time being, which should also help market sentiment to remain relatively favourable," Fox said.

The US and China have imposed billions in tariffs on each other's goods, badly hurting financial markets and causing concern that the conflict will force world economy into recession.

"The news is good and the reaction of the market is good," said Art Hogan, chief market strategist at National Securities.

Willie Delwiche, investment strategist at Baird, said if the markets want to see a new high that's going to be durable, then there is a need to see more US broad market improvement. "It's heading in that direction, but it's not there yet."

In terms of factoring in the earnings reports that have already come in, analysts expect earnings from S&P 500 companies for the July-September quarter will be down 3.7 per cent from a year ago. That's slightly better than the 4 per cent drop that analysts were initially expecting.

On the Brexit issue, London is waiting for the European Union's decision on delay in Britain's exit from EU. But the British culture minister Nicky Morgan warned lawmakers that October 31 is still the default date for Brexit, calling on parliament to back Prime Minister Boris Johnson's bid to hold an election on December 12.

Gulf stock markets mostly slipped, following a series of disappointing corporate results in Saudi Arabia, while Egypt edged up on property shares.

In Dubai, the index closed up 0.1pc, buoyed by real estate shares. The emirate's largest listed developer Emaar Properties added 0.2 per cent. The Abu Dhabi's main index was down 0.3 per cent, snapping a four-day winning streak with First Abu Dhabi Bank (FAB) and Abu Dhabi Islamic Bank shedding 0.8pc. In Saudi Arabia, the benchmark index slipped 0.3 per cent, snapping a three-day winning streak, as Saudi Basic Industries (Sabic) fell 1.2pc following an 86pct plunge in third-quarter net profit.