Boom! Wall Street has ended at a new all time closing high.

Relief that the Phase One trade deal with China is finally signed lifted stocks, despite the agreement’s flaw.

The Dow closed up 91 points, or 0.3%, at 29,031, having earlier hit an intraday peak at 29,127 points.

With the Phase One trade deal in the bag, Donald Trump is now hosting a lunch for the Chinese delegation and his own officials.

The president sound upbeat, saying that relations between the two sides are better than ever.

Here’s my colleague Dominic Rushe on today’s trade deal:

Donald Trump has signed the first phase of a new trade agreement with China after two years of tension between the two superpowers that have rattled economies around the world.

Trump said: “Today, we are taking a momentous step towards a future of fair and reciprocal trade. Together we are righting the wrong of the past.”

“At long last Americans have a government that puts them first at the negotiating table,” he said. “This is the biggest deal anybody has ever seen.”

Trump and China’s chief trade negotiator, Liu He, signed the deal at a packed press conference, attended by Ivanka Trump, much of Trump’s cabinet, Henry Kissinger, and media and business leaders including Stephen Schwarzman, the chairman of Blackstone, and Ajay Banga, the president of Mastercard. The signing came hours after Democrats named the team that will prosecute Trump in an impeachment trial that starts early next week.

The first phase of the deal will further open the Chinese market to US companies, and includes roughly $200bn in Chinese purchases of American goods and services. But it will also leave in place much of the $360bn worth of tariffs that the US has already imposed on Chinese goods, and the threat of additional punishment if Beijing does not live up to the terms of the deal.

Trump campaigned on tackling what he saw as China’s unfair trade practices, accusing the country of “raping” the US and perpetuating “the greatest theft in the history of the world”.

The often rancorous trade dispute has hurt agriculture, manufacturing and other sectors of the US economy, and the uncertainty it has engendered has worried business leaders. But its impact on the broader economy does not appear to have been as dire as some predicted.

The trade deal, if it holds, could be a major political boost for Trump in an election year when he can argue his tough stance with China has paid off. US stock markets hit new record highs ahead of the signing.

Nick Marro, analyst at The Economist Intelligence Unit, also has concerns about the deal.

He’s not convinced that China can meet its pledge of buying $200bn of extra goods from America each year. And even if it can, what happens in 2022 when the deal expires?

Marro fears that the trade war could flare up again, despite today’s upbeat (and sometimes rambling) signing ceremony. He says:

• The trade war has demonstrated the problems of overexposure to a single market. But rather than encouraging export diversification, the trade deal risks exacerbating this over reliance through its purchase targets.
  
  
• This is especially because much of these purchases will come via artificially generated demand, rather than market dynamics. Once the two year time frame is up, and China thinks about diversifying its imports, what might happen to US farmers who have since ramped up domestic production on expectations of Chinese demand? At face value, it’s not encouraging as a completely sustainable trade framework going forward.
  
  
• The deal has some encouraging language, but it’s provisions still leave open questions around the severe structural issues in the US-China trade relationship. This, combined with likely difficulties in implementing many of these commitments, suggests that there is a high risk that the deal might fall apart later this year. Companies may need to seriously consider the scenarios around a resumption in tariff hostilities.

Details of the trade deal are now being released by the White House.

It includes a pledge by China to buy another $200bn of US goods over the next two years, and will come into effect in 30 days.

However, China only appears to be promising to buy an extra $33bn of agricultural products (unless I’m missing something).

• Manufacturing goods: at least $32.9bn more in 2020, rising to $44.8bn more in 2021
• Agricultural products: at least $12.5bn more in 2020, rising to $19.5bn in 2021.
• Energy products: at least $18.5bn more in 2020, rising to $33.9bn in 2021
• Services: at least $12.8bn more in 2020, rising to $25.1 in 2021

China has also promised to restrict its requests for access to confidential data when reviewing whether to allow US companies to access its markets, and pledge to speed up the process for authorising US biotech products.

That will address some concerns about ‘forced technology transfers’, and the opening up of China’s markets.

Finally, after more than 18 months of trade conflict, America and China are signing the preliminary trade deal.

Donald Trump sets the scene in the White House, saying “The world is watching today, it’s a great honour to be here”.

Then he shakes hands with vice-premier Liu He, and the pair head over to the desks where a few copies of the agreement are waiting.

A few strokes of the pens later, and the deal is done!

Trump is now inviting vice-premier Liu He to address the room (after joking that Liu deserves a break after all his hard work and should catch a movie).

Liu produces a letter from his boss, president Xi Jinping! It’s addressed to Donald Trump.

The letter begins with Xi telling Trump that conclusion of the phase one trade agreement between China and the US is good for both countries, and the whole world.

We need equality and mutual respect, to tackle issues together, says Xi. Both sides must implement the deal in “real earnestness”, and make progress in trade and economic co-operation. Healthy and steady growth in relations will need efforts from both sides.

Xi also says that he hopes that US treats Chinese companies fairly, and promises to work closely with Trump.

I believe that under our guidance, China-US relations will deliver more results and provide more benefits for our people

Xi concludes by wishing the Trump family best wishes, and happiness and success in the Chinese new year.

Looking ahead, Donald Trump says the US and China will start talking about a Phase Two deal as this deal kicks in.

But in the meantime, the tariffs on hundreds of billions of dollars of Chinese imports will remain in place.

We’re leaving tariffs on, but I will agree to take them off if we agree phase two, the president says. We need the tariffs, or we won’t have any cards to pay with, he adds.

And Trump concludes his remarks by claiming that “this is the biggest deal that anyone’s ever seen”.

It will bring “harmony, prosperity, commerce and much more between the US and China”, and “lead to even stronger world peace.”

Honestly....

Trump has finally returned to the details of the US-China trade talks.

He says Beijing has agreed to “greatly expand” the products it buys from America, and will buy “much more than $200bn” over the next two years.

That includes more than $50bn on agriculture products, $75bn on manufacturing products, and $50bn of energy.

He says it also contains very strong IP protections, very strong restrictions on currency devaluations, and has “total and full enforceability”.

[But given the WTO is so weak, how will this deal really be enforced, I wonder...]

Trump reckons that China is now more open to US beef, pork, dairy, animal feed, and biotechnology.

The White House band is playing, as Donald Trump and Liu He arrive. Everyone’s on their feet.

The president speaks first.

Today, we are taking a momentous step towards a future of fair and reciprocal trade, says Trump. Together we are righting the wrong of the past.

He claims that the Phase One trade deal will provide economic security for US families, businesses and farmers.

And in a piece of classic Trump, the president says that many people thought such a deal was impossible (who exactly?!), but it should have happened a long time ago.

Trump speaks warmly of Liu He being a friend, and says he will visit China in the ‘not too distant future’.

Boom! The Dow Jones industrial average has hit a new all-time high.

These optimistic noises from Larry Kudlow and Stephen Mnuchin may be cheering New York traders, encouraging them to drive stocks higher.

This has lifted the Dow by 0.5%, or 150 points, to 29,089 -- a new peak.

China is hoping that the White House might roll back some tariffs in the coming months, if the Phase One trade deal holds up.

That’s according to the Global Times, a Chinese newspaper which is a good guide to Beijing’s thinking.

It says:

China and the US are set to sign the long-awaited phase one trade deal on Wednesday (US time); the deal, which involves a nine-chapter text, has fully taken into account the concerns and interests of both countries, and it is expected to bring the world’s two largest economies back on track to stable and sound development, experts close to the deal told the Global Times on Wednesday.

The hard-won text involves nine chapters, touching sectors such as intellectual property rights (IPR), technology transfer, food and agricultural products, financial services, exchange rates and transparency, trade expansion as well as bilateral assessments and dispute settlement mechanisms.

“The phase one deal, which is signed based on an equal footing, is in the interests of both countries and will be a constraining force on both China and the US,” Gao Lingyun, an expert at the Chinese Academy of Social Sciences in Beijing who is close to the trade talks, told the Global Times on Wednesday.

As the two reached consensus on the phase-one deal, US agreed to lower tariffs on $120 billion worth of Chinese products to 7.5 percent from 15 percent, but a 25 percent tariff remains on roughly $250 billion worth of Chinese products. The US also rolled back plans to impose tariffs on all additional imports.

“The tariffs will be further scrapped when negotiations in the upcoming months run smoothly,” Gao said.

Newsflash: The Phase-One trade deal that America and China will sign today is an “enormous win”.

That’s according to Treasury secretary Stephen Mnuchin, who is speaking outside the White House now.

Mnuchin insists that this preliminary deal is a great success, even though it doesn’t appear to cover important issues such as cyber crime.

This is the first time that we’ve had an agreement with China that addresses agricultural purchases, structural reforms, financial services and currency issues, says Mnuchin.

He adds that China has also agreed to buy “$200bn of additional things” over the next few years.

Sweeping aside fears that the deal is a damp squib, he says the White House expects “significant growth” this year.

This is an enormous win.

The average consumer will see a stronger economy in 2020 thanks to this deal....

The deal itself should be signed in a few hours time (11.30am in Washington, or 4.30pm UK time).

Just in: British Airways’ owner IAG has filed an official complaint to the European Commission over the rescue of Flybe.

The move comes amid a growing backlash to the government’s rescue of the ailing regional carrier from rival airlines, opposition politicians, and environmentalists.

My colleague Gwyn Topham explains:

IAG has written to the competition directorate of the EU saying that the rescue deal announced on Tuesday night by ministers, which could include a £100m loan and deferral of an outstanding tax bill, contravenes state aid rules.

IAG’s chief executive, Willie Walsh, had earlier described the deal as “a blatant misuse of public funds”.

The European Commission said it was ready to discuss with Britain its rescue of regional airline Flybe, noting that any state aid should be designed to avoid the distortion of competition and a level playing field.

Here’s the full story:

Our economics editor Larry Elliott is back from WEF’s press conference on its Global Risks report, and says:

A year of extreme weather events and mounting evidence of global heating have catapulted the climate emergency to the top of the list of issues worrying the world’s elite.

The World Economic Forum’s annual risks report found that, for the first time in its 15-year history, the environment filled the top five places in the list of concerns likely to have a major impact over the next decade.

Børge Brende, President of the World Economic Forum, said: “The political landscape is polarised, sea levels are rising and climate fires are burning. This is the year when world leaders must work with all sectors of society to repair and reinvigorate our systems of cooperation, not just for short-term benefit but for tackling our deep-rooted risks.”

After a month that has seen bush fires raging out of control in Australia, Brende said there was a need for urgent action.

“We have only a very small window and if we don’t use that window in the next 10 years we will be moving around the deckchairs on the Titanic.”...

More here:

WEF’s Risks Report has also predicted that 2020 will see rising political and social tensions, both within countries and between them.

So with the added risk of economic slowdown, it could be a turbulent year.

78% of survey respondents said they expect “economic confrontations” and “domestic political polarization” to rise in 2020.

Increased political polarisation, extreme heat waves and the destruction of the natural environment are also worryingly likely, with policymakers struggling to make the progress needed on the climate emergency.

Here are the six key points from the report (online here).

Geopolitical Instability:

National politics in many countries has evidenced intense divisiveness and ‘pushbacks’, coupled with increasingly fractious international relations. These volatilities will likely persist, challenging cooperation on key priorities.

Economic Concerns:

As economic confrontations between major powers grow, the global economy shows greater signs of a concerted slowdown.

Climate Response Shortcomings:

Weak international agreements belie rising investor and popular pressure for action, against a backdrop of a multitude of natural catastrophes and indicators of longer-term disruptions. 2020 is a critical year for nations to accelerate progress towards major emissions reductions and boosting adaption investments.

Biodiversity Loss Impacts:

Many ecosystems are in decline or at risk of distinction. Biodiversity loss poses irreversible consequences to societies, economies, and the health of the planet.

Technological Governance Deficits:

Emerging technology risks can erode social discourse, threaten economic stability, exacerbate geostrategic competition, and pressure national and international security. Getting a better handle on systemic risks will require a significant technology governance refresh at all levels.

Creaking Health Systems:

Changing societal, environmental, demographic, and technological trends are straining health systems globally. While transformative technology, medicines, and insurance can improve healthcare, they also introduce new risks and trade-offs.

Britain’s inflation rate has fallen to a three-year low, making an early interest rate cut increasingly likely.

The Consumer Prices Index fell to just 1.3% in December, down from 1.5% in November, to its lowest since November 2016. That’s some way below the Bank of England’s target of 2%.

Clothing and restaurants had the biggest downward push on prices. That suggests that retailers have been forced to slash prices to encourage customers through their doors.

Here are some key charts from WEF’s risks report, showing how environmental issues (coloured green) are now seen as the biggest threat to the global economy.

WEF are now taking questions.... firstly from my colleague Larry Elliott.

Q: Next week, lots of the CEOs who say they want to fight the climate emergency will be flying to Davos in their private jets - isn’t there a major reality gap here?

Most people who go to Davos go by rail, WEF’s Adrian Monck replies [Larry and I will be chugging up the mountain next week]

There’s biofuel at Zurich Airport if you want to top up your private jet, and the Annual Meeting is going to be carbon neutral, Monck adds.

But he agrees that Davos needs to do more than just pay lip service to environmental issues.

There’s nothing worse than an organisation recognising a risk and doing nothing about it, which is why we take it so seriously.

NEWSFLASH: the World Economic Forum’s new global risks report is out!

And for first time in its 15 year history, the top five global risks to the global economy over the next decade are all related to the environment.

This confirms that the climate emergency has rocketed to the top of the global agenda, with business leaders and economists now awake to the dangers from rising temperatures.

The top five are:

• Extreme weather events
• Failure of climate change mitigation and adaptation
• Human made environmental damage and disaster
• Major biodiversity loss and ecosystem collapse
• Major natural disasters such as earthquakes.

This comes from a survey of 759 global experts and decision makers across the globe, many of whom will be travelling to Davos next week for WEF’s Annual Meeting.

WEF are announcing more details from the report now....

Newsflash: Bank of England policymaker Michael Saunders has warned that the UK economy appears to be stagnating.

Speaking in Northern Ireland right now, Saunders says that is recent business surveys suggest there is ‘little or no growth’ in the British economy right now.

So with growth sluggish, Saunders favours an “expansionary monetary policy stance” -- ie lower interest rates.

In a speech titled Risk management in a sluggish economy, he says:

“It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target.

With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”

Saunders is one of two policymakers who voted to cut interest rates at the Bank’s last meeting in December. Other members of the Monetary Policy Committee have sounded dovish since, meaning rates could be lowered at the next meeting in a fortnight.

Howard Archer of EY Item Club reckons Saunders is certain to vote for a cut again.

Donald Trump famously claimed that trade wars were good and easy to win.

But Washington’s refusal to dial back the tariffs on $360bn Chinese goods shows clearly that trade wars are hard to get out of.

Peter Boockvar, chief investment officer of Bleakley Advisory Group, says US businesses need to hunker down, as they can’t escape these tariffs easily.

We’re still stuck with these tariffs which are a drag on growth in trade and manufacturing

These tariffs have now become a roach motel.”

(for those unversed in Americanisms, this means a place you can easily get into, but struggle to escape)

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The US and China will finally sign their Phase One trade deal today, but there’s no much celebration in the markets.

President Donald Trump and vice-premier Liu He will both put their signatures to the agreement, at a ceremony in Washington later today. The deal should calm the turbulent trade conflict between the two nations which blew up in 2018, slowing global trade and hurting the world economy.

We can expect Trump to talk up the deal as a major breakthrough, with Beijing agreeing to buy up to $50bn of US agricultural products per year.

But the fizz is going flat, even before the corks fly out of the bottles.

That’s because the White House has already declared that the existing tariffs imposed over the last 18 months or so will remain in place until a full trade deal deal is agreed.

That means tariffs on $360bn of Chinese imports will remain in place, probably until after November’s presidential election.

Treasury secretary Stephen Mnuchin broke the news to reporters overnight, saying:

“These tariffs will stay in place until there is a Phase 2. If the president gets a Phase 2 in place quickly, he’ll consider releasing tariffs as part of Phase 2.”

We don’t know exactly what’s in the 80-page Phase One deal, but it appears to duck some of the really serious sticking points, such as intellectual property protections and China’s subsidies of its companies.

Investors fear that a comprehensive trade deal could take a long time to agree, given the long grind just to agree Phase One.

There’s also concern that China might not stick to the deal, meaning it could swiftly unravel:

As Ipek Ozkardeskaya, senior analyst at Swissquote Bank, puts it:

The US – China trade deal is like watching a live show in the theatre of the absurd. The Trump administration revealed a detail that nobody expected just before the signature of the phase-one trade deal today: the tariff cuts will not take effect before the US election in November.

This means that the US tariffs will continue weighing on Chinese exports for almost an additional year, while the emerging market giant will certainly be asked to deliver on its promise to buy massive amounts of US farm goods and manufactured products immediately. The risk here is that the double-standard agreement could provide a weak basis for the future negotiations, impair the benefits, or even spoil the deal.

So don’t bank on major action in the markets today, although the Dow Jones industrial average did briefly jump over 29,000 points yesterday, before tariff fears struck....

Also coming up today

The World Economic Forum are releasing their annual Global Risks report, identifying the key threats to the global economy ahead of next week’s gathering in Davos. Trade wars, the climate emergency and geopolitical tensions will probably feature highly.

We also get the latest UK inflation data - a weak reading could give the Bank of England more leeway to consider an interest rate cut.

The agenda

• 9am GMT: World Economic Forum publishes its Global Risks report
• 9.30am GMT: UK inflation data for December. Expected to remain at 1.5%, a three-year low
• 4.30pm GMT: US and China sign their Phase One trade deal