Global equities surge on China-US trade truce; dollar drops, yuan up

Sterling slumps to five-week low on Brexit nerves

Traders work on the floor of the New York Stock Exchange (NYSE) as a picture of former US President George H.W. Bush appears on a screen following a moment of silence on Dec 3, in New York City. The Dow Jones industrial average opened more than 400-points higher, following positive news from weekend

trade negotiations in Argentina. (AFP)

NEW YORK, Dec 3, (Agencies): A temporary ceasefire in the US-China trade war boosted global stocks to their highest in about three weeks on Monday, while sending the dollar lower and the Chinese yuan and several trade-dependent currencies higher.

The rally in equities follows an agreement reached between Washington and Beijing at the G20 summit in Argentina on Saturday that calls for a 90-day trade tariff truce.

The Dow Jones Industrial Average rose 225.51 points, or 0.88 percent, to 25,763.97, the S&P 500 gained 19.73 points, or 0.71 percent, to 2,779.9 and the Nasdaq Composite added 87.31 points, or 1.19 percent, to 7,417.85.

The pan-European STOXX 600 index rose 0.98 percent.

US President Donald Trump said China has agreed to “reduce and remove” tariffs below the 40 percent level that is currently being charged on US-made vehicles. That helped boost shares of European automakers more than 3 percent.

The White House also said that the existing 10 percent tariffs on $200 billion worth of Chinese goods would be increased to 25 percent if no deal was reached within 90 days.

MSCI’s all-country world index climbed 0.25 percent, marking its sixth consecutive day of gains.

In currency markets, the US dollar fell broadly as currencies battered by trade tensions staged a comeback.

China’s yuan and several tradedependent currencies made strong advances against the greenback as investors sold the safe-haven US currency and bought up riskier assets.

The offshore yuan gained about 1 percent, while the Aussie - viewed as a barometer of Chinese growth - was 0.7 percent higher against the greenback.

The New Zealand dollar gained 0.8 percent, while the US dollar lost 0.8 percent against the Canadian dollar.

Meanwhile, the sterling gave up all of its early gains and dived to its lowest level since the end of October as growing concerns about British parliamentary approval for a proposed Brexit deal prompted investors to sell the currency.

US Treasury yields rose after the USChina deal to hold off on new tariffs reduced demand for safe-haven US debt, but they reversed course in midday trading. In oil, prices jumped by more than 5 percent after the United States and China agreed the 90-day trade dispute truce, Canada’s Alberta province ordered a production cut, and as exporter group OPEC looked set to reduce supply.

US

US stocks rose on Monday, boosted by gains in trade-sensitive industrial and technology stocks after the United States and China agreed upon a temporary trade detente.

Strong gains in Apple Inc and Microsoft Corp pushed the technology sector higher by 1.76 percent.

Apple, which gained 1.8 percent, was hit last week by worries over the next round of tariffs possibly being placed on the company’s iPhones.

The trade-sensitive industrials sector rose 1.87 percent with bellwethers Caterpillar Inc and Boeing Co up about 5 percent each.

The benchmark S&P 500 index and the Nasdaq rose to their highest in over three weeks.

US carmakers General Motors Co, Ford Motor Co and Tesla Inc rose between 2.4 percent and 4.0 percent.

Energy stocks rose 2.0 percent as crude prices surged, helping lift Exxon Mobil Corp up by 1.5 percent and Chevron Corp by 2.0 percent.

The consumer discretionary sector gained 2.1 percent, helped by a 4.2 percent rise in shares of Nike Inc and a 4.0 percent gain in Amazon.com Inc.

J.P. Morgan said it expected Nike’s North America revenue growth to accelerate in the second quarter and third quarter compared to the first.

At 10:02 a.m. ET the Dow Jones Industrial Average was up 333.80 points, while the S&P and Nasdaq were up more than a percent.

After being hammered for much of the past two months, Wall Street posted its biggest weekly gain last week in nearly seven years on hopes that a truce could be reached over trade between the world’s top two economies.

The Philadelphia Semiconductor index rose 2.8 percent, its highest in over a month, driven by strong gains in the shares of US chipmakers, which have the highest revenue exposure to China.

Advanced Micro Devices Inc was up 9.2 percent. Among few weak spots, the defensive real estate sector dropped 0.25 percent, utilities slipped 0.54 percent and the consumer staples sector fell 0.61 percent, the only three sectors in the S&P that traded lower.

Advancing issues outnumbered decliners for a 3.32-to-1 ratio on the NYSE and a 2.12-to-1 ratio on the Nasdaq.

The S&P index recorded 30 new 52week highs and no new lows, while the Nasdaq recorded 55 new highs and 26 new lows.

Europe

Miners, autos, tech, and oil stocks surged on Monday, driving Europe’s main benchmarks up strongly after US and Chinese leaders agreed a temporary truce in a trade war.

Germany’s DAX - the most sensitive to China and trade war fears - led the way with a 2.6 percent rise to its highest level since Nov 14. The pan-European STOXX 600 climbed 1.8 percent, set for its strongest day in eight months.

Financials were the biggest driver of European shares as China-exposed bank HSBC rose and investors cheered the prospect of a end to a trade war which has dented growth.

Car stocks, which have been battered by fears of rising tariffs, jumped 4.2 percent after Trump said China agreed to cut import tariffs on American-made cars.

German carmakers Daimler, BMW, and Volkswagen climbed 4.8 to 6.2 percent, while tyre maker Continental gained 4.1 percent and Faurecia rose 6.9 percent.

Tech stocks jumped 3.1 percent with chipmakers the best-performing. Infineon, STMicroelectronics , and AMS gained 5.8 to 6.7 percent.

Overall analysts have cut their 2019 earnings growth expectations for world stocks over the past month as concern grew that a trade war would compound the impact of a slowing global economy.

The oil sector also jumped 2.7 percent as crude soared ahead of this week’s OPEC meeting, expected to result in a supply cut.

Luxury stocks highly sensitive to China were also among top gainers, with heavyweight conglomerate LVMH up 5.9 percent and Gucci owner Kering rising 6.1 percent.

Away from the trade war relief, shares in French supermarkets Carrefour and Casino, underperformed after riots in Paris on Saturday.

Carrefour was down 1.1 percent and Casino was up just 0.5 percent, while France’s main CAC 40 rose 2 percent.

Argenx topped the STOXX with an 11.3 percent gain after the Netherlandsbased biopharma company said it signed a deal worth potentially up to $1.6 billion with Johnson & Johnson affiliate Cilag to develop its Cusatuxumab drug in certain types of cancer.

Asia

Hong Kong and Shanghai led a surge across Asian markets Monday after the United States agreed to suspend imposing tariffs on China for three months, while oil prices soared on expectations of a big production cut. News of Saturday’s deal lit a fuse under Asian markets, with Hong Kong and Shanghai each rallying more than two percent, while the Chinese yuan -- which has tumbled this year on worries about the trade row -jumped 0.8 percent.

Tokyo climbed one percent, Sydney rose 1.8 percent, Seoul put on 1.7 percent, Singapore was 2.2 percent higher and Taipei rallied 2.5 percent.

The upbeat sentiment sent higheryielding and emerging market currencies higher against the dollar. The Mexican peso was 1.3 percent higher, South Korea’s won jumped 0.9 percent, the South African rand climbed 1.2 percent and the Australian dollar put on 0.8 percent. ■ Key figures around 0710 GMT Tokyo - Nikkei 225: UP 1.0 percent at 22,574.76 (close)

Hong Kong - Hang Seng: UP 2.4 percent at 27,150.55

Shanghai - Composite: UP 2.6 percent at 2,654.80 (close)

Dollar/yen: DOWN at 113.50 yen from 113.54

Oil

Oil prices jumped by more than 3 percent on Monday after the United States and China agreed to a 90-day truce in a trade dispute and Canada’s Alberta province ordered a production cut, while exporter group OPEC looked set to reduce supply.

Brent crude futures rose $1.86, or 3.1 percent, to $61.32 a barrel, by 11:07 a.m. EST (1607 GMT). US West Texas Intermediate (WTI) crude rose $1.68 to $52.61 a barrel, a 3.3 percent gain.

Both benchmarks surged by more than 5 percent earlier in the session.

China and the United States agreed during a weekend meeting in Argentina of the Group of 20 leading economies not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing disputes.

The trade war between the world’s two biggest economies has weighed heavily on global trade and sparked concerns of an economic slowdown.

Crude oil has not been included in the list of products facing import tariffs, but traders said the positive sentiment of the truce was supporting crude markets.

Oil also received support from an announcement by Alberta that the Western Canadian province will force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage.

The Organization of the Petroleum Exporting Countries meets on Thursday to decide output policy. The group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a production surplus that has pulled down crude prices by around a third since October.

Within OPEC, Qatar said it will leave the producer club in January. Qatar’s oil production is only around 600,000 bpd, but it is the world’s biggest exporter of liquefied natural gas (LNG).

Qatar’s decision to quit OPEC shows the frustration of small producers at the dominant role of a Saudi and Russia-led panel, Iran’s OPEC governor Hossein Kazempour Ardebili told Reuters, adding that any supply cuts should come only from countries that had increased output.

Outside OPEC, Russian oil output stood at 11.37 million bpd in November, down from a post-Soviet record of 11.41 million bpd it reached in October, Energy Ministry data showed on Sunday.

Currencies

Sterling fell on Monday to its lowest level since the end of October as growing concerns about British parliamentary approval for a proposed Brexit deal prompted investors to sell the currency.

A broad rally across global stocks and risky currencies had lifted the pound in early trade after US President Donald Trump and China’s President Xi Jinping agreed to a 90-day ceasefire in their trade dispute to try to resolve their differences.

Against the dollar, the pound fell to its lowest since October at $1.2697, down nearly 0.7 percent from the day’s highs. Against the euro, the pound weakened by 0.4 percent to 89.23 pence.