Equities scale one-month ‘highs’ on news of US-China trade talks

Oil rises to $61 on trade hopes, US inventories eyed

NEW YORK, Sept 5, (RTRS): Stocks hit onemonth highs worldwide on Thursday as improved risk appetite led investors away from safe-haven assets such as bonds and gold on renewed hope for progress in US-China trade negotiations and upbeat US economic data.

The announcement that top negotiators from the United States and China will meet early October in Washington raised hopes of a possible resolution to the two countries’ brutal trade war that has wreaked havoc on the global economy.

US private payrolls increased in August at their fastest pace in four months, according to ADP, blowing past analyst estimates ahead of Friday’s more comprehensive jobs report from the Labor Department.

A separate report showed the US services industry rebounded last month to its fastest expansion since February, bouncing back from a three-year low, according to the Institute for Supply Management’s non-manufacturing purchasing managers index (PMI).

The Dow Jones Industrial Average rose 446.4 points, or 1.69%, to 26,801.87, the S&P 500 gained 41.5 points, or 1.41%, to 2,979.28 and the Nasdaq Composite added 138.85 points, or 1.74%, to 8,115.73.

European and emerging markets stocks jumped on hopes that next month’s US-China trade talks would move the world’s two largest economies closer toward ending their cantankerous dispute, which has pushed major economies toward recession.

The pan-European STOXX 600 index rose 0.63% and MSCI’s gauge of stocks across the globe gained 1.17%.

Emerging market stocks rose 1.25%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.06% higher, while Japan’s Nikkei rose 2.12%.

ADP’s private employment report helped US Treasury yields extend their earlier gains.

Benchmark 10-year notes last fell 1-4/32 in price to yield 1.5857%, from 1.459% late on Wednesday.

The 30-year bond last fell 2-27/32 in price to yield 2.0797%, from 1.957% late on Wednesday.

The dollar held its losses against a basket of world currencies following the upbeat US jobs data. Earlier news of a fresh round of trade talks weighed on the dollar and the yen while boosting riskier currencies.

The dollar index fell 0.07%, with the euro up 0.06% to $1.104.

The Japanese yen weakened 0.61% versus the greenback at 107.06 per dollar, while Sterling was last trading at $1.2321, up 0.58% on the day.

The tide of trade optimism also lifted oil prices, but the gain was capped by a report showing an unexpected increase in US crude inventories.

US crude rose 1.88% to $57.32 per barrel and Brent was last at $61.94, up 2.04% on the day.

Gold retreated from its six-year peak as investors shifted to riskier assets.

Spot gold dropped 2.5% to $1,513.84 an ounce.

US

US stocks hit one-month highs on Thursday on hopes of a de-escalation in trade tensions after Washington and Beijing agreed to hold high-level talks next month, while strong US economic data allayed some concerns of a slowdown.

Wall Street’s three main indexes touched their highest level since Aug. 1 and the benchmark S&P 500 index breached its 50-day moving average, a key indicator for short-term momentum.

China’s Commerce Ministry said its trade team would lay the groundwork with their US counterparts in mid-September for the October talks.

Technology stocks provided the biggest boost to S&P 500, rising 2.05%, while financials jumped 2.31%, the most among the 11 major S&P sectors.

Interest rate-sensitive banks surged 3%, following a rise in US Treasury yields.

“The trade news was the spark that lit this rally and then the economic data extended it,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

The ADP National Employment Report, considered a precursor to the Labor Department’s more comprehensive jobs report, showed US private employers’ payrolls grew at the fastest pace in four months in August, led by big gains in service-sector jobs.

Another private survey showed growth in the US services sectors accelerated in August, rebounding from its weakest level in nearly three years, as new orders rose to their highest level since February amid trade worries.

The upbeat reports eased concerns of an economic downturn, which was exacerbated by data on Tuesday that showed a contraction in US factory activity in August. Investors will keep a close watch on the crucial nonfarm payrolls data due on Friday.

At 11:41 am. ET the Dow Jones Industrial Average was up 446.46 points, or 1.69%, at 26,801.93, the S&P 500 was up 41.58 points, or 1.42%, at 2,979.36 and the Nasdaq Composite was up 132.80 points, or 1.66%, at 8,109.68.

In deal news, insurer Prudential Financial Inc agreed to acquire online insurance startup Assurance IQ Inc for $2.35 billion. Shares of Prudential fell 2.81%.

Europe

European shares rose to fresh onemonth highs and safe-haven assets like gold and the yen fell on Thursday after US-China talks were flagged for October, raising hopes their trade war will de-escalate before it further damages the world economy.

The pan-European STOXX 600 index was up 0.6% in late morning trading in Europe, a touch lower from earlier levels marking its highest level since Aug. 1. France’s CAC 40 index jumped 0.9% to hit a more than onemonth high, outperforming major European bourses, aided by a 6.3% rise in shares of engine maker Safran after the company upped its full-year profit forecasts.

The rally followed gains in Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan gaining as much as 1.1% to reach its highest since Aug. 2.

Pointing to a firmer opening on Wall Street, US stock futures gained 0.9%.

The Chinese yuan jumped versus the dollar in offshore trade, while safe-haven assets such as gold, the Swiss franc, and the yen fell.

China’s Commerce Ministry said on Thursday that its trade team would consult with their US counterparts in mid-September in preparation for negotiations in early October, hinting at progress in reducing trade friction.

Both sides agreed to take action to create favourable conditions, the ministry added, without giving more details.

Adding to the upbeat mood, a parliamentary vote in Britain put the brakes on a no-deal exit from the European Union, Hong Kong withdrew a contentious extradition bill that sparked mass protests in the Chinese-ruled city, and weeks of political turmoil in Italy appeared to ease.

“Since yesterday, there has been limited downside in markets because of what happened in Hong Kong, but now the US-China talks are the story,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management Co in Tokyo.

“It’s the same about Brexit, which means less downside risk.”

Any sign that Washington and Beijing are closer to scaling back or resolving their trade dispute would lift a significant burden from the global economy, but many analysts believe the two sides are dug in for a longer and costlier battle.

Weighing on sentiment was data that showed German industrial orders fell more than expected in July on poor demand from abroad, indicating manufacturers in Europe’s biggest economy continue to struggle in the third quarter.

Asia

Asian shares were mostly higher Thursday amid encouraging global developments, including British lawmakers seeking a less chaotic exit from the European Union and the potential easing of political tensions in Hong Kong.

Japan’s benchmark Nikkei 225 rose 2.3% to 21,118.15 in afternoon trading. Australia’s S&P/ASX 200 added 0.9% to 6,613.20, while South Korea’s Kospi gained nearly 1.0% to 2,007.43. Hong Kong’s Hang Seng erased earlier gains and was down 0.8% at 26,304.96, while the Shanghai Composite rose 1.2% to 2,992.34.

Shares rallied on Wall Street, reversing Tuesday’s losses, when disappointing US manufacturing data and an escalation in the ongoing trade war between the US and China led to a sell-off that ended a three-day winning streak for the market.

Oil

Oil rose to $61 a barrel on Thursday as hopes of progress in resolving the US-China trade row boosted investor sentiment, although a report showing US crude inventories unexpectedly increased weighed on prices.

Crude had gained more than 4% on Wednesday as positive Chinese economic data sparked a wider market rally. On Thursday, China said Beijing and Washington had agreed to hold high-level trade talks in early October.

Benchmark Brent crude was up 60 cents at $61.30 a barrel by 1324 GMT, having earlier fallen to $60.25. US West Texas Intermediate (WTI) crude added 30 cents to $56.56.

Still, the American Petroleum Institute (API), an industry group, on Wednesday said US crude stockpiles rose by 400,000 barrels last week, whereas analysts had expected a fall. The government’s official supply report is due later on Thursday.

Also putting downward pressure on prices has been mounting evidence of slowing economic growth worldwide, which has prompted analysts to lower forecasts for oil demand growth.

BP Chief Financial Officer Brian Gilvary told Reuters on Wednesday that global oil demand was expected to grow by less than 1 million barrels per day in 2019, a slowdown from previous years.

Currencies

The yen fell on Thursday as global tensions including the US-China trade conflict showed signs of thawing, bolstering investor confidence and reducing demand for safe-haven currencies.

The pound rose to its highest level against the dollar in more than a month on hopes that a no-deal Brexit would be avoided. At 12:08 am. (1608 GMT), the dollar was up 0.53%at 106.975 yen after reaching 107.235 yen, which was its highest level since late July.

Against the euro, the yen was 0.57% lower at118.1 after falling to 118.6, marking a three-week low versus the common currency.

The dollar was 0.07% weaker versus a basket of currencies on lower safe-haven demand, but its losses was limited by some encouraging news on the US labor market.

Sterling continued its rally after British lawmakers approved legislation on Wednesday to extend the Brexit deadline for the third time and rejected Prime Minister Boris Johnson’s motion to hold a snap election.

The pound was last trading up 0.63% at $1.233, moving further from a three-year low reached on Tuesday. Against the euro, sterling gained 0.54% at 89.54pence after touching near sixweek high of 89.49 pence.