Stocks up on belief trade threat overstated

US stocks rose and Treasuries erased gains as investors speculated that President Donald Trump’s tough tariff talk won’t translate into the most severe protectionist policies.

The S&P 500 Index swung more than 1pc from losses to gains after hedge fund billionaire Ray Dalio called Mr Trump’s threat of a trade war “political show”. Tenyear US bonds followed stocks lower.

The greenback rose against most peers with the Canadian dollar leading losers. West Texas crude advanced to around $62 a barrel.

In Europe, the broadest measure of the region’s equities halted a four-day slide after a major breakthrough on the path to a German government. The ISEQ was down around 1pc while Italy’s stocks and bonds were the standout losers as antiestablishment political groups surged in Sunday’s election.

“The positive story today is the lack of anything bad happening,” Kevin Caron, a senior portfolio manager at Washington Crossing Advisors, said by phone.

“The bad news would have been if [Trump] announced more tariffs, or if there was some kind of reciprocal action from another country.”

The Italian election result and Germany’s move toward a coalition kick off a busy week for macro events. Both the Bank of Japan and European Central Bank will meet to decide on interest rate policy, while China hosts its National People’s Congress. Overshadowing it all will be the next developments on global trade after US President Donald Trump riled markets with his proposed tariffs last week.

America won’t lower duties on steel and aluminium from Mexico and Canada unless the two countries agree to a revamped Nafta, he said. (Bloomberg)