* Pound surges as exit polls show Tories with majority
* European futures 1.4% higher, pound to temper FTSE gains
* Nikkei highest since Oct 2018 on Sino-U.S. deal reports
* Markets scale back bets on rate cuts around the world
* World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Marc Jones and Wayne Cole
LONDON/SYDNEY, Dec 13 (Reuters) - Stocks rose and the pound
gained on Friday as the prospect of a China-U.S. trade deal and
an election victory for Britain's Brexit-backing Conservative
Party cleared two of the darkest clouds on the global investment
horizon.
The double dose of relief undercut safe-haven sovereign
bonds and the Japanese yen and led markets to scale back
expectations of more interest rates cuts around the world.
"Global investors have been given two of the biggest gifts
on their Christmas list and should be appreciative for a while
at least," said Sean Callow, a senior forex analyst at Westpac.
"Global equity indices such as MSCI World should set more record
highs and sterling could push above $1.36."
The pound reached its highest since mid-2018 as exit polls
and then UK election results wiped out any chance of a victory
by the left-wing Labour opposition or a hung parliament, which
had been a worry for investors.
Prime Minster Boris Johnson won a commanding majority in
Britain's Parliament, giving him the power to deliver Brexit,
though trade talks with the European Union were set to drag on
for months yet. The pound had started to see some profit-taking but was
still up almost 2% at $1.3411 GBP=D3 . It reached its highest
levels against the euro since mid-2016.
UK shares exposed to the domestic economy surged as soon as
they opened. The mid-cap stocks index FTSE 250 .FTMC , which is
home to many companies with high UK revenues, surged about 5% to
record highs.
"Over the next 1-2 months I think it is about long-term
buyers of sterling returning to the market that might have been
on the sidelines up until this point," said NatWest Markets head
of G10 FX strategy Paul Robson. Sovereign wealth funds could now
start buying UK equities again and foreign direct investment
could pick back up, he said.
Trade optimism had already lifted Wall Street to record
highs. Reuters reported the United States had proposed reducing
some tariffs on Chinese goods and delaying a tranche of tariffs
as part of phase one of a deal.
China would need to agree to make $50 billion in
agricultural purchases in 2020, that person and another U.S.
source familiar with the talks said. "If the U.S. cuts the current tariffs to some extent as
reported, that is not something markets have priced in, so we
could see a further leg up," said Norihiro Fujito, chief
investment strategist at Mitsubishi UFJ Morgan Stanley
Securities in Tokyo.
LESS NEED FOR MORE CUTS?
Europe's pan-regional STOXX 600 share market STXEc1 jumped
1.5% higher on the twin boosts. In Asia, Japan's Nikkei .N225
climbed 2.5% to a 14-month top. Shanghai blue chips .CSI300
advanced 2%. .T .SS
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS jumped 1.5% to its highest since late April.
E-Mini futures for the S&P 500 ESc1 rose 0.4% to another
peak. On Thursday, the Dow .DJI closed up 0.79%, the S&P 500
.SPX gained 0.86% and the Nasdaq .IXIC rose 0.73%.
That was bad news for bonds, and yields on U.S. 10-year
Treasuries US10YT=RR shot up to 1.91%, a rise of 12 basis
points in just two sessions. Germany's 10-year government bond
yield touched a six-month high at -0.217%. GVD/EUR
Interest rate futures 0#FF: slipped as investors priced in
less chance of a rate cut by the Federal Reserve next year - a
shift seen across a range of developed nations including the UK.
Other safe harbours also took a beating, with the yen
sliding across the board. The dollar gained to 109.60 yen JPY=
having risen 0.7% overnight.
The dollar fared less well elsewhere, slipping 0.5% to
96.792 .DXY against a basket of currencies, as the pound and
the euro both benefited from the UK election result.
The dollar fell to an 18-week low against the yuan, since
any trade truce would be seen as a boon for the export-heavy
Chinese economy. It was at 6.9607 yuan CNH= having shed 1.2%
overnight.
Spot gold was flat at $1,467.60 per ounce XAU= .
Oil prices rallied on hopes a trade deal would support
global growth and thus demand O/R . U.S. crude CLc1 added 31
cents to $59.49 a barrel. Brent crude LCOc1 rose 42 cents to
$64.62.
"Risk appetite ran wild after Trump signalled that he made a
deal with China and that will only be positive for global demand
forecasts for crude," said Edward Moya, senior market analyst at
OANDA.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
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