* MSCI ACWI, S&P500 at record high after Phase 1 deal inked
* Chinese shares little moved
* Bond yields dip on low inflation data
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Hideyuki Sano
TOKYO, Jan 16 (Reuters) - World stocks inched ahead to a
record high on Thursday after the United States and China signed
an initial deal to defuse their 18-month trade war, though
financial markets were wary as a number of thorny issues
remained unresolved.
MSCI's broadest index of world stocks .MIWD00000PUS firmed
0.04% in early trade after closing at record level on Wednesday
while its index on Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.21%.
Japan's Nikkei .N225 rose 0.14% while mainland China's
Shanghai composite index was almost flat .SSEC .
U.S. President Donald Trump and Chinese Vice Premier Liu He
on Wednesday signed a deal that will roll back some tariffs and
see China boost purchases of U.S. goods and services by $200
billion over two years. "Whether somebody looks at this as big progress or little
progress, it is something tangible and so the arrow is pointing
in a direction that the market is comfortable with," said Chuck
Carlson, chief executive officer of Horizon Investment Services
at Hammond, Indiana in the United States.
The Phase 1 deal however does not fully eliminate the
tariffs while the $200 billion purchase targets, which include
energy, farm and manufacturing products, look daunting to
achieve.
Nor does it address structural economic issues that led to
the trade conflict. Officials say these will be dealt in Phase 2
negotiations, though the differences there are so fundamental
that many investors doubt any deal will come through.
"While markets seemed to take this deal as a risk-on signal,
we should all be aware that headlines about trade, particularly
U.S. China trade, are going to be a constant feature of 2020,"
said Hannah Anderson, Global Markets Strategist, J.P. Morgan
Asset Management in Hong Kong.
"Highly sensitive issues like the U.S.'s export ban to
several Chinese companies, increased scrutiny on Chinese
investments abroad, and China's application of its commitment to
treat foreign and domestic business alike within China are
likely to make headlines throughout the year," she said.
On the Wall Street, the S&P 500 .SPX closed at a record
high of 3,289.3 points, up 0.19%, with gains fairly small after
the market has rallied for months on hopes of a deal.
The index was dragged down by fall in financial shares
following lacklustre earnings from Bank of America BAC.N and
Goldman Sachs GS.N .
"While the trade deal has provided a relief, there wasn't
any positive surprises for markets. For shares to rise further,
we need more evidences of improvement in the real economy and
earnings," said Hirokazu Kabeya, chief global strategist at
Daiwa Securities.
DISINFLATION EVERYWHERE
Bond yields dropped as a boost from the trade deal failed to
offset pressure from low U.S. producer price inflation data,
which highlighted persistently low inflationary pressure.
The price index rose less than expected in December to cap
2019 with rise of 1.3%, lowest since 2015. The 10-year U.S. Treasuries yield slipped to one-week low of
1.780% US10YT=RR compared with a high of 1.900% last Thursday
and last stood at 1.793%.
Weak inflation was evident also in UK where consumer price
inflation slowed to 1.3%, its slowest rate in three years.
The data fanned bets the Bank of England will cut interest
rates at the end of this month, pushing the 10-year gilts yield
to 2 1/2-month low of 0.630% GB10YT=RR . The British pound last traded at $1.3040 GBP=D4 , having
managed to recover a tad from its three-week low touched earlier
this week.
The Swiss franc held firm, having rising to its strongest
against the dollar in over a year and its highest against the
euro in almost three years after the United States added
Switzerland to its watchlist of currency manipulators.
Washington's decision led traders to think it will become
difficult for the Swiss National Bank to intervene to weaken the
franc in the future.
The Swiss currency last stood at 0.9643 franc per dollar
CHF= , near Wednesday's high of 0.9631.
In contrast, the Chinese yuan hovered just below its
5-1/2-month high touched earlier this week after Washington
dropped its currency manipulator label on China.
Coupled with the trade deal, warmer ties between the two
countries are seen as positive for the Chinese economy and its
currency.
The offshore yuan stood at 6.8851 to the dollar CNH= , near
Tuesday's high of 6.8662.
Other currencies have mostly muted reaction to the trade
deal.
Against the yen the dollar traded at 109.93 yen JPY= ,
below its near eight-month peak of 110.22 set on Tuesday.
The euro stood at $1.1152 EUR= , extending its recovery
from a low of $1.10855 hit last Friday.
Oil prices edged back after touching a six-week trough the
previous day on data showing big increases in U.S. refined
products.
U.S. West Texas Intermediate (WTI) crude CLc1 gained 0.48%
to $58.09 per barrel. It had fallen to as low as $57.36 on
Wednesday.