Asia Markets

'Christmas has come early': Japan and Hong Kong soar more than 2.5% amid trade optimism

Key Points
  • Hong Kong's Hang Seng index and Japan's Nikkei 225 both soared more than 2.5% on Friday.
  • Sources told CNBC on Thursday that Washington and Beijing have agreed to a "phase one" trade deal in principle, pending U.S. President Donald Trump's approval.
  • The White House has offered to scrap the next round of tariffs on Chinese exports to the U.S. that are set to take effect on Sunday, sources told CNBC on Thursday. Washington has also proposed slashing existing duties on $360 billion in Chinese products by 50%.

Shares in Asia jumped on Friday following news that Washington and Beijing have agreed to a phase one trade deal in principle.

Hong Kong's Hang Seng index led gains among major markets regionally, soaring 2.57% to close at 27,687.76, as shares of Tencent and HSBC jumped 3.44% and 2.99%, respectively.

Japanese stocks surged on the day. The Nikkei 225 gained 2.55% to 24,023.10 as shares of index heavyweight Fast Retailing soared 4.39%. The Topix index added 1.59% to end its trading day at 1,739.98.

Meanwhile, the Bank of Japan's "tankan" survey released Friday showing business confidence among the country's large manufacturers diving to its lowest level in more than six years.

Mainland Chinese stocks rose on the day, with the Shanghai composite gaining 1.78% to around 2,967.68 and the Shenzhen component up 1.71% to 10,004.62. The Shenzhen composite also advanced 1.48% to about 1,660.55.

South Korea's Kospi also saw robust gains as it closed 1.54% higher at 2,170.25, with shares of chipmaker SK Hynix skyrocketing 5.4%.

Shares in Australia also advanced, as the S&P/ASX 200 gained 0.46% to close at 6,739.70, with shares of major miner BHP jumping 1.94%.

Overall, the MSCI Asia ex-Japan index jumped 1.61% higher.

"From the markets point of view, it does seem like Christmas has come early," Daniel Morris, senior investment strategist at BNP Paribas Asset Management, told CNBC's "Squawk Box" on Friday.

"If you compare this sentiment at this point last year, you know, just really a 180 degrees with concerns about a U.S. recession and so on," Morris said.

"From that point of view, a contrarian point of view, when everyone was so pessimistic and it turned out to be a great year for risk assets, for equities. I agree, it should make anyone a little bit cautious now that everything, so to speak, seems to be going right," he said.

The moves came amid U.S.-China trade optimism. The White House has offered to scrap the next round of tariffs on Chinese exports to the U.S. that are set to take effect on Sunday, sources told CNBC on Thursday. Washington has also proposed slashing existing duties on $360 billion in Chinese products by 50%.

"It is important to realize that there still hasn't been any official announcements but between (U.S. President Donald) Trump's tweets and reports by the media, there's more reason to believe that minimally, tariffs will be delayed," Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, wrote in an note on Thursday.

"As we've learned the hard way, (Trump's) attitude and decisions can change last minute so until he makes an official announcement which must occur before December 15th, the tariffs could still be imposed," Lien warned.

Movements in the British pound were also watched on Friday, with the British currency advancing 1.88% to $1.3409 after U.K. Prime Minister Boris Johnson's Conservative Party reportedly secured a commanding majority following Thursday's general election.

Overnight stateside, stocks on Wall Street rose amid the trade optimism. The S&P 500 gained 0.9% to see a record close of 3,168.57. The Nasdaq Composite also finished at an all-time closing high, adding 0.7% to 8,717.32. The Dow Jones Industrial Average closed 220.75 points higher at 28,132.05.

Currencies and oil

The U.S. dollar index, which tracks the greenback against a basket of its peers, was last at 96.832 after seeing highs above 97.2 yesterday.

The Japanese yen, often seen as a safe-haven currency in times of market uncertainty, traded at 109.64 against the dollar after weakening sharply from levels below 108.6 yesterday. The Australian dollar changed hands at $0.6922 after rising from levels below $0.688 in the previous session.

Oil prices rose in the afternoon of Asian trading hours, with the international benchmark Brent crude futures contract up 0.78% to $64.70 per barrel. U.S. crude futures also added 0.61% to $59.54 per barrel.

— This report was updated to reflect the correct trading price of the British pound.