Stocks bounce back as global risks recede; dollar slides

Stocks advanced as a broad easing of risks across the globe gave investors a reprieve. The dollar fell the most since June, while Treasuries were mixed.

The S&P 500 rebounded from Tuesday’s losses along with European and Asian shares as political tensions appeared to subside in Hong Kong, Italy and the U.K., while indicators in China and Europe hinted global economic growth may not be as bad as some expected. Technology shares, which led Tuesday’s decline that was the first in four sessions, paced the advance. The 10-year Treasury yield traded around 1.45%, while the dollar gained versus the yen.

Equities in Hong Kong rose the most since 2018 after embattled leader Carrie Lam said she formally withdrew legislation to allow extraditions to China, the detonator for three months of often-violent protests. In the U.K., the pound held gains after a law that would block a no-deal Brexit passed a key vote in Parliament. The euro advanced while the onshore Chinese yuan gained.

“The main news is geopolitical, with less risk in Hong Kong, and Italy and the U.K. Investors are reacting positively to the lower geopolitical risks even though there’s still concerns over trade tensions as well as slower economic growth,” said Kate Warne, an investment strategist at Edward Jones. “Overall, it’s a positive day.”

Traders are rushing back into riskier assets as event risks seem to be receding, from a possible Chinese crackdown in Hong Kong to confrontations between the European Union and two of its biggest members.

At the same time, investors remain on the alert for any news on China-U.S. trade talks.

And remaining in the background is the upcoming Federal Reserve meeting, and the speculation surrounding how much the central bank may cut this year to stave off a potential economic slowdown.