Global stocks cheered by trade talk, sterling gains on May bets

Oil rises on Libyan supply cut, US inventories

NEW YORK, Dec 12, (Agencies): Stock markets around the world rose along with US Treasury yields on Wednesday as US President Donald Trump sounded upbeat about a China trade deal and sterling bounced on bets that UK Prime Minister Theresa May would keep her job.

US Treasury yields advanced in tandem with Wall Street’s gains after Trump said trade talks with China are progressing with discussions underway by telephone and more meetings likely among officials of both countries.

In an interview with Reuters on Tuesday, Trump also said he would intervene in the Justice Department’s case against a top executive at China’s Huawei Technologies if it served national security interests or helped to close a trade deal.

But after a spate of dizzying volatility in the past few days, there was some wariness about whether gains would hold.

“The Dow Jones Industrial Average rose 348.46 points, or 1.43 percent, to 24,718.7, the S&P 500 gained 39.98 points, or 1.52 percent, to 2,676.76 and the Nasdaq Composite added 144.51 points, or 2.06 percent, to 7,176.34.

The pan-European STOXX 600 index rose 1.88 percent and MSCI’s gauge of stocks across the globe gained 1.76 percent.

The British pound sterling jumped off 20-month lows as May vowed to fight a challenge to her leadership saying a change could jeopardize Britain’s divorce from the European Union.

The currency had tumbled on concerns about vote of no confidence in the prime minister but traders bet she would survive after a number of colleagues backed her, isolating rivals who want a clean, sudden break from the EU. Sterling was last trading at $1.2651, up 1.34 percent on the day.

The dollar index fell 0.4 percent, with the euro up 0.42 percent to $1.1362.

The euro was helped by a report Italy would scale down its budget deficit target to between 2.0-2.2 percent of gross domestic product, below the previous target of 2.4 percent.

Investors were also digesting US consumer price data that showed unchanged headline inflation, causing US Treasuries to initially pare gains.

But benchmark 10-year notes fell 5/32 in price to yield 2.8987 percent, from 2.881 percent late on Tuesday.

While markets still expect the Fed to tighten at its policy meeting next week, Trump said in a Reuters interview on Tuesday that the central bank would be “foolish” to do so.

US crude rose 1.24 percent to $52.29 per barrel as oil was supported by a drop in US crude inventories, a cut in Libyan exports and an OPEC-led deal to trim output.

Spot gold added 0.3 percent to $1,246.65 an ounce.

Japan’s Nikkei had led Asia with a jump of 2.15 percent, and while Shanghai rose 0.34 percent.

US

Stocks rose sharply on Wall Street in midday trading, clawing back some of the ground they lost over the previous week. Technology companies rallied Wednesday and energy companies rose along with crude oil prices. Microsoft rose 2.3 percent and Chevron gained 1.4 percent.

Healthcare and industrial companies also jumped, while safer, high-dividend stocks like utilities and household goods makers were little changed.

The S&P 500 index gained 39 points, or 1.5 percent, to 2,676.

The Dow Jones Industrial Average jumped 333 points, or 1.4 percent, to 24,703. The Nasdaq composite rose 147 points, or 2.1 percent, to 7,179.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.90 percent.

Technology companies and retailers rose Wednesday. Microsoft jumped 2.1 percent and Amazon rose 1.3 percent.

Energy companies jumped as crude oil prices rose 1.4 percent.

Equipment rental company United Rentals rose 7.3 percent after giving strong forecasts for 2019.

Stocks have gone through huge swings this week after a wave of selling at the end of the previous week.

The S&P 500 index gained 30 points, or 1.2 percent, to 2,667.

The Dow Jones Industrial Average jumped 283 points, or 1.2 percent, to 24,653. The Nasdaq composite rose 88 points, or 1.3 percent, to 7,120.

Europe

European shares rose on Tuesday as optimism over the China-US trade dispute helped them recover from the two-year lows hit in the previous session on a burst of political risk and worries over slowing global growth.

The pan-European STOXX 600 benchmark index rose 1.5 percent, while eurozone stocks added 1.3 percent and Germany’s DAX, the most sensitive to China due to its big exporters, rose 1.5 percent.

Sentiment was lifted by reports that Chinese and US trade officials spoke by phone, a sign that discussions between the world’s top two economies continued even after the arrest of a top executive at Chinese tech giant Huawei.

The export-oriented auto and tech sectors were among the biggest gainers, both up more than 2 percent, while materials stocks rose more than 3 percent as the trade hopes boosted metal prices.

France’s CAC 40 was up 1.4 percent after French president Emmanuel Macron pledged late on Monday to raise the minimum wage and cut taxes in a bid to prevent more violent protests that have rocked the eurozone’s number two economy.

France’s Suez, however, fell 2.8 percent as a source said the board of French utility Engie decided to stick with its 32 percent stake in the utilities group.

In Italy, Banco BPM rose 2.5 percent after announcing it had agreed to sell up to 7.8 billion euros in bad loans along with a stake in its debt recovery business to Credito Fondiario and US fund Elliott.

WPP rose 4.8 percent after the company said it would spend 300 million pounds and cut 2,500 jobs under a plan by new boss Mark Read to steer the world’s biggest advertising group back to growth.

Shares in Ashtead jumped 3.6 percent as the equipment rental firm said it expected full-year results ahead of expectations.

Asia

Asian markets rallied Wednesday on much-needed good news on the ChinaUS trade talks, while the pound extended losses as it emerged that Prime Minister Theresa May will face a noconfidence vote.

A flurry of positive developments in the tariffs stand-off between the world’s top economies provided some early Christmas cheer on trading floors, fuelling hopes they can avert an all-out trade war.

Canada on Tuesday released on bail Meng Wanzhou, chief financial officer at Chinese telecoms giant Huawei, whose arrest last week sparked fury in Beijing and worries about a truce agreed at the G20 by Donald Trump and Xi Jinping this month.

Providing some extra support to the news of Meng’s release was an interview in which Trump said he could intervene in the case if it helps seal a trade pact with China, adding: “Whatever’s good for this country, I would do.”

China added to market-friendly noise by saying it had agreed to cut tariffs on US autos to 15 percent from 40 percent – wiping out a levy imposed earlier this year in response to US measures.

Investors welcomed the headlines – despite news China had detained a former Canadian diplomat who served in Beijing – fuelling a surge in regional markets.

Tokyo ended 2.2 percent higher and Shanghai finished up 0.3 percent, while Hong Kong jumped 1.6 percent.

Sydney and Seoul each jumped 1.4 percent, while Taipei climbed 1.1 percent, Wellington put on 0.8 percent and Mumbai gained one percent.

Car firms across Asia tracked gains in their US counterparts as the China tariffs news lifted optimism in the auto market, with Hyundai 5.3 percent higher in Seoul while in Tokyo Toyota was up more than two percent and Mitsubishi added almost three percent.

And energy firms were also well up after data showed a massive drop in US stockpiles, indicating a pick-up in demand to offset worries about a global supply glut that has hurt prices.

The rupee recovered from Tuesday’s slump fuelled by the resignation of the head of the Indian central bank.

Key figures around 0820 GMTT - Tokyo - Nikkei 225: UP 2.2 percent at 21,602.75 (close)

Hong Kong - Hang Seng: UP 1.6 percent at 26,186.71 (close)

Shanghai - Composite: UP 0.3 percent at 2,602.15 (close)

Dollar/yen: UP at 113.50 yen from 113.40 yen

Oil

Oil rose above $61 a barrel on Wednesday, supported by an industry report that showed a drop in US crude inventories, a cut in Libyan exports and an OPEC-led deal to trim output.

The American Petroleum Institute (API) said on Tuesday that US crude inventories dropped by 10.2 million barrels last week, more than analysts had forecast. Official inventory figures are due later on Wednesday.

Brent crude futures rose $1.08 to $61.28 by 1233 GMT, while US futures were last up $1.02 to $52.67.

The oil price has fallen by a third since the start of October, when it hit a four-year high above $87. It is set for its biggest quarterly slide since the fourth quarter of 2014.

Oil has been supported this week by a drop in supply from Libya, which declared force majeure on exports from its largest oilfield on Sunday after tribesmen and state security guards seized the facility.

The Libyan outage follows last week’s decision by the Organization of the Petroleum Exporting Countries and some non-OPEC producers including Russia to cut supply by 1.2 million barrels per day (bpd) for six months from Jan 1.

“The OPEC+ deal from last week will allow more of a bullish position to be taken up by some market participants from this point,” analysts at JBC Energy said in a report.

“The crude picture at least looks somewhat firmer for the next six months than it did previously.”

While these supply cuts supported prices, a weaker economic outlook and higher production elsewhere kept gains in check.

Currencies

The pound jumped on Wednesday, rebounding from a 20-month low, as traders bet UK Prime Minister Theresa May would survive a no-confidence vote on her leadership, allowing her to salvage her deal for Britain to exit the European Union. A Bloomberg report on a revised Italian budget proposal to the European Union that is lighter on debt lifted the euro from a near 1-1/2 week low. An index that tracks the dollar against a basket of currencies that includes the euro and sterling retreated below a near one-month peak reached on Tuesday.