Stock prices rise as fears of trade war ease

Stocks surged Tuesday following conciliatory comments from U.S. President Donald Trump and Chinese President Xi Jinping aimed at releasing some pressure from a trade dispute between the world’s biggest economies. Treasuries fell with the dollar.

All major U.S. equity indexes spiked higher in afternoon trading and were up at least 1.9 percent after Trump praised Xi’s “kind words on tariffs and automobile barriers.” In a keynote address Tuesday before the Boao Forum for Asia, China’s leader backed free trade and dialog to resolve disputes and pledged to open the nation’s banking and auto manufacturing sectors.

With the newly friendly tone, investors are now weighing whether fears of an outright trade war have become overblown. That in turn is reinvigorating faith in the synchronized global-growth story ahead of earnings season, even after a Federal Reserve official cautioned that the spat won’t be resolved soon.

Stocks continued their advance despite an earlier hiccup amid additional revelations about Monday’s raid on the office of Trump’s personal lawyer, Michael D. Cohen, by the Federal Bureau of Investigation.

“Without the underlining dynamism of momentum in the markets and supported by improving fundamentals, there is going to be a tendency for the market to be knocked around by headlines,” said Kevin Caron, a senior portfolio manager at Washington Crossing Advisors. “As we go to the next week or so, this back and forth on trade probably dominates.”

Elsewhere, the Stoxx Europe 600 Index followed shares from Sydney to Hong Kong higher. Gold climbed. WTI crude shot past $65 a barrel and Brent futures reached their highest level since December 2014. European government bonds edged lower, while the single currency rose after somewhat hawkish remarks by a European Central Bank official. And the yen declined.

Russian assets remained in focus following a fresh round of U.S. sanctions. The ruble extended its decline, dropping to the lowest level since December 2016, and equities fluctuated before rising.