Labour leader Jeremy Corbyn has been asked by Theresa May to work with her on breaking an impasse in parliament just over a week before Britain is meant to be leaving the European Union (Stefan Rousseau)

Hong Kong (AFP) – Asian markets enjoyed another rally Wednesday as a report said China and the US were closing in on a deal to end their long-running trade row.

The pound held gains after British Prime Minister Theresa May said she would look for another Brexit delay and softened her position on the issue to avert a calamitous no-deal divorce from the European Union.

While Wall Street provided a flat lead, Asian investors built on recent gains, with optimism given an extra boost by a report in the Financial Times saying Beijing and Washington were on course for a historic agreement.

Expectations that the world’s top two economies will eventually sign a deal has been a key driver of a global equities rally this year and the FT article adds to the general sense of hope.

It comes after better-than-expected factory data out of China and the US that eased worries about growth in the global economy, while a dovish turn from central banks has also provided support.

“Recent positives such as the US Federal Reserve pausing their interest rate increases, incremental signs of progress on China-US trade negotiations and a dovish bias from China’s (central bank) to support growth have given investors a sunnier attitude about risk assets,” Tai Hui, chief market strategist for Asia Pacific at JP Morgan Asset Management, said.

In early trade, Hong Kong was up one percent — having risen for six straight days — Shanghai added 0.3 percent and Tokyo went into the break 0.8 percent higher.

Sydney and Singapore each gained 0.7 percent, while Seoul rose 0.5 percent. Taipei and Manila were each slightly higher.

– May’s Brexit gamble –

The pound jumped on Tuesday after May, who is struggling to get her Brexit agreement through parliament, said she would request a second delay to the April 12 divorce day that is “as short as possible and which ends when we pass a deal”.

She also said she would work with the leader of the opposition Labour Party, Jeremy Corbyn, who favours closer ties with the European Union, indicating she is willing to take a softer Brexit than she had hoped.

The news cheered investors who fear the impact of a no-deal exit on the economy.

However, there remains a lot of uncertainty as May’s decision to work with Corbyn fuelled anger among hardline Brexiters in her own party.

“There are still lots of questions what the next steps are, given that the EU has said that the withdrawal agreement is not negotiable, and are only willing to offer an extension on the basis that it leads to a clear outcome,” warned OANDA senior market analyst Alfonso Esparza.

“Joining Labour could be the first step towards that clarity, but with so many factions remaining it will not be an easy task.”

Oil prices also continued to rise, with both main contracts around five-month highs, on hopes for an easing of China-US trade tensions, upbeat economic data and signs that OPEC and Russia are sticking to their agreed output cuts.

Added to that is the political and economic crisis in Venezuela, where “output has virtually collapsed as power cuts have removed critical oil export facilities from the grid”, said Stephen Innes at SPI Asset Management.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 0.8 percent at 21,669.78 (break)

Hong Kong – Hang Seng: UP 1.0 percent at 29,913.59

Shanghai – Composite: UP 0.3 percent at 3,187.09

Pound/dollar: DOWN at $1.3130 from $1.3137 at 2040 GMT

Euro/pound: UP at 85.42 pence from 85.27 pence

Euro/dollar: UP at $1.1215 from $1.1202

Dollar/yen: UP at 111.45 yen from 111.36 yen

Oil – West Texas Intermediate: UP 18 cents at $62.76 per barrel

Oil – Brent Crude: UP 34 cents at $69.71 per barrel

New York – Dow: DOWN 0.3 percent at 26,179.13 (close)

London – FTSE 100: UP 1.0 percent at 7,391.12 (close)

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.