HONG KONG • Asian markets rallied yesterday after China and the United States said they were close to agreeing on a mini trade deal, but the pound struggled on fresh Brexit uncertainty as European Union leaders considered extending a deadline for Britain to leave the bloc.

Investors tracked a strong lead from Wall Street, where the S&P 500 flirted with another record, after the US Trade Representative's office said top-level negotiators had held talks last Friday and were "close to finalising" an agreement.

And the Chinese Commerce Ministry said both sides agreed to "properly address each other's core concerns", fuelling hopes that the economic superpowers are on course to a resolution to their long-running and painful tariffs spat.

The two are aiming to get the pact ready to be signed by US President Donald Trump and his Chinese counterpart Xi Jinping when they meet at next month's Asia-Pacific Economic Cooperation meeting in Chile.

Hong Kong rallied 0.8 per cent and Shanghai ended up 0.9 per cent. The tech-heavy Shenzhen Composite Index jumped 1.6 per cent after Chinese state news reported Mr Xi as saying China would boost investment in blockchain technology and speed up its development.

Bitcoin soared around 15 per cent to nearly US$10,000 - its highest level for a month - before ticking back slightly.

Tokyo and Seoul each ended 0.3 per cent higher and Sydney was marginally up. Taipei, Bangkok, Jakarta and Manila were also higher.

However, while the agreement would be a big positive for markets, analysts point out that it is still the first part of a wider deal that could take some time to complete.

Mr Ray Attrill, head of foreign exchange strategy at National Australia Bank, said: "What's not yet clear is if both sides have agreed that even if the planned Dec 15 tariff increases won't go ahead if phase one is agreed, whether there will be any wind back of the higher tariffs imposed on Sept 1."

That issue, he added, was "something China was said to be demanding towards the end of last week but we doubt the US is ready to concede on".

Still, the mood on trading floors is positive and expectations that the Federal Reserve will cut interest rates again at its policy meeting this week are also providing support.

Sterling edged down with the focus on Westminster, where MPs are voting on whether to grant British Prime Minister Boris Johnson a Dec 12 general election, which he has called for to break the Brexit deadlock.

With lawmakers refusing to pass his divorce deal before Thursday's deadline, the Prime Minister wants snap polls he hopes will give him a majority of MPs who will push it through Parliament.

EU leaders are due to make a decision on whether to extend the deadline to the end of January.

And while expectations are for Britain to leave with a deal, Mr Attrill said: "It's hard to see how this renewed level of uncertainty can be anything other than negative for sterling, given the size of recent gains."

AGENCE FRANCE-PRESSE