Stock markets trade sideways pending China-US pact

LONDON — World stock markets gave a mixed picture on Monday as investor attention turned to the planned signing of a China-US trade pact, with Wall Street firmer and European markets mostly retrenching.

London was steady, helped by a weaker pound which boosts share prices of multinationals that earn in dollars.

Sterling sagged as Bank of England policymaker Gertjan Vlieghe hinted at a potential vote in favour of a January cut to the central bank's main interest rate.

Stoking rate-cut speculation, official data showed the UK economy shrank 0.3 per cent in November, as Brexit and political uncertainty contributed to slashing manufacturing output.

But despite some adjustments to the downside, underlying sentiment was "positive as traders are looking ahead to the signing of the first phase of the US-China trade deal on Wednesday", CMC Markets analyst David Madden said.

The picture was brighter in Asia with Hong Kong rallying more than 1 per cent and Shanghai up 0.8 per cent.

While some of the optimism that characterised the end of 2019 is making a cautious return to trading floors, dealers were left a little disappointed by a below-par jobs report out of Washington on Friday which pushed the main US indices into the red.

But on Monday, Wall Street mildly rebounded in early trading as analysts agreed that while the data missed expectations, it did suggest that the Federal Reserve will likely maintain interest rates at low levels for some time to come, with some tipping the next move could be another cut.

 Pen to paper 

Focus this week is on Washington, where China and the United States will finally put pen to paper on their much-vaunted "phase one" trade deal, which has lowered tensions between the economic superpowers and boosted hopes for the global economy.

While there are not expected to be any major announcements at the signing, investors will be looking for signs of progress on the next part of negotiations for a wider agreement.

"Provided the deal inks a commitment from China to increase agricultural products and outlines a dependable enforcement mechanism, the market will go merrily along the way," said AxiTrader's Stephen Innes.

"Traders are probably not too concerned about a currency pact as China should hold the line on any weakness in the yuan as we roll forward to negotiating phase two."