Progress in US-China trade talks ‘spurs’ world stock markets rally

Hong Kong stocks weighed by weak China data

NEW YORK, Feb 16, (RTRS): Progress in the US-China trade talks helped send world stock markets broadly higher on Friday and pulled investors out of the safety of government bonds.

Europe’s broad Stoxx 600 index rallied 1.4 percent. The Dow Jones Industrial Average rose 443.86 points, or 1.74 percent, to 25,883.25, the S&P 500 gained 29.87 points, or 1.09 percent, to 2,775.6 and the Nasdaq Composite added 45.46 points, or 0.61 percent, to 7,472.41.

MSCI’s gauge of stocks across the globe gained 0.82 percent. The index is up nearly 10 percent for the year.

Emerging markets were set for their first back-to-back weekly loss since late last year. The MSCIEF index of emergingmarket stocks dropped 0.7 percent, leaving it up approximately 7.6 percent for the year.

Though there were signs of progress in the trade discussions, some investors remained cautious on whether tariffs would soon be eliminated.

US

Wall Street rallied on Friday, with the Dow and the Nasdaq posting their eighth consecutive weekly gains as investors grew hopeful that the United States and China would hammer out an agreement resolving their protracted trade war.

All three major US indexes ended the session higher, and for the fourth straight session, the S&P 500 held above its 200day moving average, a key technical level.

Talks between the United States and China will resume in Washington next week, with both sides saying progress has been made toward resolving the two countries’ contentious trade dispute.

Tariff-vulnerable industrials provided the biggest lift to the blue-chip Dow, led by bellwethers Boeing Co, 3M Co , United Technologies Inc and Caterpillar Inc .

Indeed, the trade row’s effects were reflected in Deere & Co’s earnings report, which came in below analyst estimates in part because of slowing international trade. The agricultural equipment manufacturer’s shares fell 2.1 percent.

With nearly 80 percent of S&P 500 companies having reported, fourth-quarter earnings season is largely in the rearview mirror. Analysts now see a profit increase of 16.2 percent for the quarter, according to Refinitiv data.

Going forward, however, the outlook continues to worsen. First quarter earnings are currently seen falling by 0.5 percent, the first year-on-year decline since mid-2016. The Dow Jones Industrial Average rose 443.86 points, or 1.74 percent, to 25,883.25, the S&P 500 gained 29.87 points, or 1.09 percent, to 2,775.6 and the Nasdaq Composite added 45.46 points, or 0.61 percent, to 7,472.41.

All 11 major sectors in the S&P 500

ended the session in the black.

The rate-sensitive financial sector led the S&P 500’s advance, bouncing back from Thursday’s sell-off as US Treasury yields crept back up.

UK

Britain’s FTSE 100 rose for a fifth straight session and posted its third straight week of gains amid a broader rally in global markets on Friday on news of progress in the Sino-US trade talks. The midcap index meanwhile saw online trading platform Plus500 fall sharply on a report that it may have “misled” investors over losses.

The FTSE 100 added 0.6 percent and the midcaps closed 0.1 percent higher, with investors seeing little change in the Brexit backdrop after Prime Minister Theresa May’s latest defeat in parliament on Thursday.

Consumer and healthcare stocks – often deemed attractive in times of economic uncertainty – contributed to early gains as weak US retail sales data and more downbeat data from China fanned worries about the health of the world economy.

Though initially tentative, the bluechips strengthened as Washington and Beijing signalled progress in their negotiations, with talks set to resume next week in Washington. The index is on track for its best month since April 2018.

Royal Bank of Scotland added 2.4 percent after announcing a better-thanexpected

dividend and reporting a more than doubling of 2018 profit.

Standard Life Aberdeen slumped 6 percent on its worst day in a year after a discounted share offering.

Europe

Reports of progress in US-China trade negotiations drove a strong rally in European stocks on Friday, boosting mining, autos, and banking shares as investors hoped for a resolution to the tariff war between the world’s two biggest economies. The trade-sensitive German index jumped as much as 2 percent while the STOXX 600 rallied 1.3 percent, accelerating gains after a tepid open following weak China inflation data.

Mining stocks jumped 2 percent to a four-month high and China-sensitive autos stocks rose 1.3 percent, a big reversal from early losses after weak European car sales data.

Despite the hit to European markets after weak US retail sales data on Thursday, the STOXX 600 was set for its strongest week since mid-November.

Car shares had fallen earlier after weak European car sales data. Investors are also looking to a Feb. 17 deadline for the US Commerce Secretary to release a report about whether European car imports pose a national security threat. Bank stocks were also top movers.

Euro zone bank stocks rallied sharply after ECB board member Benoit Coeure said a new round of TLTRO (targeted

long-term refinancing operations) is “possible”.

The index climbed 3.1 percent, set for its biggest one-day gain in a month.

Investors have been hoping for a new round of TLTROs - cheap multi-year loans to banks - to boost ailing euro zone lenders, particularly in Italy. Italian banks rose 2.8 percent to a two-month high after the comments.

In corporate news, some strong results helped the STOXX up.

French media giant Vivendi climbed 6 percent after reporting strong results for its Universal Music Group arm, and confirming it would soon select financial advisors to sell a stake of up to 50 percent in UMG.

Asia

The Hong Kong stock market closed lower on Friday on lacklustre China economic data, and as Chinese and US officials remained locked in high-level talks, aimed at resolving the two countries’ trade dispute.

At the close of trade, the Hang Seng index was down 1.9 percent at 27,900.84 points, while the Hang Seng China Enterprises index closed 2.1 percent weaker. Both indexes lost 0.2 percent on the week. The sub-index of the Hang Seng tracking energy shares ended 1.5 percent lower, the IT sector closed 2.7 percent weaker, the financial sector ended down 2.1 percent and the property sector shed 1.5 percent.