Global stocks ‘veer back’ upward on hopes of US-China trade talks

Pound off 20-month low, dollar firms up

NEW YORK, Dec 11, (Agencies): Stock markets around the world jumped Tuesday on hopes that trade tensions between the world’s largest economies may ease after US and Chinese officials spoke on the phone.

The S&P 500 index jumped more than 1 percent at the start of trading, following even bigger gains in Europe. It’s the latest big swing for stocks, which have been mostly falling since late September on worries about the global trade war, rising interest rates and a slowing economy.

But even within a single day, stocks have changed direction sharply in recent weeks.

The S&P 500 was up 19 points, or 0.7 percent, at 2,656 as of 11 am Eastern time. The gains were broad. Four stocks rose for every one that fell on the New York Stock Exchange. Ten of the 11 sectors that make up the S&P 500 were up, with raw-material producers and technology companies leading the way. The only sector to fall was utilities, which investors favor when they want to reduce risk.

The Dow Jones industrial average jumped 123, or 0.5 percent, to 24,547, and the Nasdaq composite rose 60, or 0.9 percent, to 7,081.

US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He have spoken by phone about “the promotion of the next economic and trade consultations,” a statement by China’s Commerce Ministry said Tuesday.

That raised hopes that the two countries can make progress on their trade dispute. Investors worry weaker global trade would dent economic growth around the world and corporate profits. The tensions have waxed and waned repeatedly this year, which has helped make the stock market particularly volatile recently.

Another flashpoint for the two countries is the detention of Meng Wanzhou, the chief financial officer of Chinese telecommunications giant Huawei, in Canada. Meng is wanted in the US for allegedly misleading banks about the company’s business dealings in Iran. China has protested her arrest.

In Europe, Germany’s DAX was up 2.2 percent, and France’s CAC 40 was up 2 percent. Britain’s FTSE 100 was up 1.8 percent.

In Asia, Japan’s Nikkei 225 lost 0.3 percent, South Korea’s Kospi fell less than 0.1 percent to 2,052.97 and Hong Kong’s Hang Seng edged up 0.1 percent. The yield on the 10-year Treasury rose to 2.86 percent from 2.85 percent late Monday, while the two-year yield held steady at 2.73 percent.The gap between those two yields has been shrinking this year, which has worried some investors. When the 10-year yield falls below the two-year yield, investors call it an “inverted yield curve” and see it as a precursor to a recession.

Benchmark US crude oil jumped $1.28, or 2.5 percent, to $52.28 per barrel. Brent crude, the international standard, gained 98 cents to $60.95. Gold slipped 50 cents to $1,248.90 per ounce. The dollar rose to 113.30 Japanese yen from 113.21 yen late Monday. The euro slipped to $1.1324 from $1.1353, and the British pound rose to $1.2560 from $1.2557.

US

The S&P 500 fell to an eight-month low on Monday as Apple Inc, as well as financial and healthcare sectors led losses on mounting worries over global growth, the US-China trade war and uncertainty over Britain’s exit from the European Union.

The S&P and the Dow Industrials, already in the red for the year after shedding more than 4.5 percent last week, fell over 1 percent. The Nasdaq reversed after an earlier bounce to drop about 0.5 percent.

Markets have been dogged by signs of cooling global growth, concerns over interest rates and worries that escalating tensions between the United States and China could scuttle a fragile trade truce.

All the 11 major S&P sectors were lower. The biggest drag on the market was a 2.5 percent drop in financials as the US Treasury yields dropped further on worries over US-China trade conflict and the Brexit turmoil.

British Prime Minister Theresa May said she was delaying a planned vote in parliament on her Brexit deal as it was set to be rejected “by a significant margin”. The rate-sensitive bank stocks tumbled 3.22 percent on worries that Brexit could hamper global growth, giving the Federal Reserve more reason to slow its pace of interest rate hikes.

JPMorgan Chase & Co, Wells Fargo & Co, Citigroup Inc and Bank of America Corp fell over 3 percent.

At 11:50 am ET, the Dow Jones Industrial Average was down 356.82 points, or 1.46 percent, at 24,032.13. The S&P 500 was down 30.14 points, or 1.14 percent, at 2,602.94, and the Nasdaq Composite was down 29.50 points, or 0.42 percent, at 6,939.75.

Energy stocks retreated 3.1 percent, as oil prices fell. Global pharmaceutical stocks weighed the most on the health index, which fell 1.3 percent and led losses among the seven sectors that were down over 1 percent.

Apple dropped 2.1 percent after Qualcomm Inc said it had won a preliminary order from a Chinese court banning the import and sale of several iPhone models in China due to patent violations.

Despite that, the technology index was down only 0.3 percent, the least among the 11 sectors.

Europe

European stocks charged higher on Tuesday, rebounding from the previous day’s sharp downturn as bargain hunters, emboldened by solid US markets, pushed aside a plethora of global worries.

Wall Street on Tuesday added to the previous day’s late surge, but the Dow index was well off opening highs approaching midday in New York.

The British pound was back under pressure late Tuesday, having earlier enjoyed a modest rebound as British Prime Minister Theresa May scrambled to rescue her Brexit deal.

In Europe, London added 1.3 percent and Frankfurt closed 1.5 percent higher.

Paris rose by nearly as much after President Emmanuel Macron made spending promises worth up to 11 billion euros ($12.5 billion) aimed at quelling the “yellow vest” unrest.

Asia

Asian equities were mixed Tuesday as investor attempts to track gains in New York are weighed by a perfect storm of issues that have hammered global markets, while the pound remained stuck around 20-month lows on Brexit uncertainty.

Bargain-buyers stepped in after the latest sell-off but the gains were limited, with fears about the outlook for the global economy keeping sentiment beaten down.

The China-US trade row, signs of softness in both countries’ economies, the Huawei arrest, Brexit, demonstrations in France and tanking oil prices are among the problems facing investors, and analysts warned of more volatility to come.

Adding to those problems is upheaval in India – another crucial economy – where the head of the central Reserve Bank of India has resigned following a row with Prime Minister Narendra Modi’s administration over alleged government interference.

Monday’s development sent the rupee, which was already Asia’s worstperforming currency, tumbling more than one percent Tuesday, with speculation the RBI had intervened to pare the losses. The Mumbai stock market initially fell a similar amount before bouncing back.

Global risk sentiment “is facing a towering wall of worry as virtually every major economy in the world is slowing, suggesting the synchronised global slowdown is accelerating at a much faster pace than thought,” said Stephen Innes, head of Asia-Pacific trade at OANDA.

In Asian trade Hong Kong rose 0.1 percent and Shanghai gained 0.4 percent but Tokyo shed 0.3 percent.

Singapore slipped 0.3 percent, Seoul was marginally lower and Sydney rose 0.4 percent. Bangkok and Jakarta slipped, while Wellington, Manila and Taipei were up.

Key figures around 0820 GMT Tokyo – Nikkei 225: DOWN 0.3 percent at 21,148.02 (close)

Hong Kong – Hang Seng: UP 0.1 percent at 25,771.67 (close)

Shanghai – Composite: UP 0.4 percent at 2,594.09 (close)

London – FTSE 100: UP 0.7 percent at 6,765.65

Pound/dollar: UP at $1.2570 from $1.2562 at 2200 GMT

Euro/dollar: UP at $1.1370 from $1.1354

Dollar/yen: DOWN at 113.13 yen from 113.35 yen

Oil

Oil rose almost $1 on Tuesday, recovering some of the previous session’s losses with the help of gains in global stocks, a slightly weaker dollar and an outage hurting Libyan production.

Benchmark Brent was up 90 cents on the day at $60.87 a barrel at 1418 GMT, having fallen 3 percent the day before. US light crude gained $1.07 to trade at $52.07.

Tuesday’s dip in the US dollar also offered some respite. A weaker dollar makes crude cheaper for holders of other currencies. A 5 percent rise in the dollar against a basket of currencies so far in 2018 has been putting pressure on oil.

A further boost came from a shutdown in production in Libya, where the National Oil Company (NOC) declared force majeure on Monday on exports from the El Sharara oilfield, the country’s biggest, which was seized last weekend by a militia group.

NOC said the shutdown would result in a production loss of 315,000 barrels per day (bpd), and an additional loss of 73,000 bpd at the El Feel oilfield.

To shore up oil prices which have tumbled by 30 percent since a peak above $86 in October, the Organization of the Petroleum Exporting Countries, Russia and their allies agreed last week to cut output by a joint 1.2 million bpd from January. Russia said on Tuesday it planned to cut its oil output by 50,000 to 60,000 bpd in January, as gradually building to an agreed cut of 220,000 bpd.

Currencies

The British pound crawled off 20-month lows on Tuesday as Prime Minister Theresa May sought support from European leaders to change her Brexit deal, with investors weighing chances of a chaotic British exit from the European Union.

Sterling was up 0.4 percent at $1.2615, a recovery of sorts after falling 1.6 percent against the dollar on Monday to as low as $1.2507.

Weakness in sterling helped nudge the euro up 0.3 percent to $1.1387.

Concerns over protests in France against inequality and President Emmanuel Macron’s economic reforms have limited the euro’s gains recently.

Investors in the euro are also focused on the European Central Bank’s economic assessment of the euro zone, due on Thursday.

The pound’s slide has also helped the dollar, which recovered from a 2 1/2week low against a basket of currencies. The dollar had fallen amid speculation the Federal Reserve would pause its rate increases sooner than previously thought.