Sterling has rallied on hopes Britain will avoind a no-deal Brexit, which economists warn could hammer the country’s economy (Justin TALLIS)

Hong Kong (AFP) – Asian markets were mostly up Wednesday with investors remaining positive about the prospects for a China-US trade deal while the pound held its gains as fears of a no-deal Brexit recede.

Wall Street provided a tepid lead as Federal Reserve boss Jerome Powell gave little away to lawmakers on the central bank’s plans for monetary policy.

With few catalysts to drive business, dealers are awaiting the latest developments in trade negotiations between the world’s top two economies, which have helped fuel a rally across global markets this year.

And while there was a stumble Tuesday, the gains continued in Asia in early trade with Shanghai rising 0.6 percent, Hong Kong up 0.4 percent, Tokyo ending the morning 0.5 percent higher and Seoul climbing 0.3 percent.

Sydney added 0.4 percent though Taipei and Wellington edged lower.

However, while equities are enjoying a broad-based advance, there are warnings against overconfidence.

“Investors will continue to trade from a positive standpoint, but anything that comes out that could possibly derail a China-US trade deal will probably lead to some strong profit-taking flows and a decent downside correction and increase in volatility,” said Nick Twidale, chief operating officer at Rakuten Securities Australia.

– ‘Perilous game’ –

Hopes that Britain will not leave the European Union without a divorce pact in place has also provided some support to markets and the pound in particular.

Sterling held its own in Asia a day after surging more than one percent on Prime Minister Theresa May’s decision to let MPs vote on a three-month delay to the March 29 Brexit deadline if she is unable to ram through her own deal.

But Jeffrey Halley, senior market analyst at OANDA, pointed out that risks remained. 

Investors are “clearly second-guessing both the UK Parliament and the European Union, moving to a Brexit delay followed by a Brexit deal scenario”, he said.

“This seems like a perilous game to play, but the momentum of this hope-versus-reality trade could push the pound to much higher levels yet. Be warned, though, that a disappointment in this glossy scenario could see just as ugly a move back down.”

Traders will be keeping an eye on the second day of congressional testimony by Fed chief Powell after saying Tuesday that he saw inflation falling short of the bank’s two percent target despite rising employment and economic growth.

The comments follow recent Fed announcements that it will be “patient” before lifting or cutting interest rates and did not provide much news to investors.

– Key figures around 0230 GMT – 

Tokyo – Nikkei 225: UP 0.5 percent at 21,553.22 (break)

Hong Kong – Hang Seng: UP 0.4 percent at 28,877.87 

Shanghai – Composite: UP 0.6 percent at 2,959.88

Pound/dollar: DOWN at $1.3253 from $1.3254 at 2200 GMT

Euro/pound: DOWN at 85.91 pence from 85.93 pence

Euro/dollar: DOWN at $1.1386 from $1.1389 

Dollar/yen: DOWN at 110.55 yen from 110.58 yen

Oil – West Texas Intermediate: UP 52 cents at $56.02 per barrel

Oil – Brent Crude: UP 24 cents at $65.45 per barrel

New York – Dow: DOWN 0.1 percent at 26,057.98 (close)

London – FTSE 100: DOWN 0.5 percent at 7,151.12 (close)

Disclaimer: This story is published from a syndicated feed. Siliconeer does not assume any liability for the above story. Validity of the above story is for 7 Days from original date of publishing. Content copyright AFP.