Global stocks rally after Mnuchin says Sino-US trade war ‘on hold’

TOKYO (Reuters) – Stocks rose yesterday after US Treasury Secretary Steven Mnuchin declared the US-China trade war “on hold” following their agreement to suspend the tariff threats that roiled global markets this year.

US S&P mini futures rose 0.60 percent in Asian trade yesterday. European stocks are expected to follow suit, with spreadbetters seeing a higher opening of 0.7 percent in Britain’s FTSE and 0.4 percent in Germany’s DAX and France’s CAC.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.45 percent, led by strong gains in greater China. Hong Kong’s Hang Seng was up 1.3 percent, Taiwanese shares 1.3 percent.

The Shanghai Shenzen CSI 300 gained 0.7 percent, hitting five-week highs. Japan’s Nikkei gained 0.4 percent. As safe-haven demand for debt fell, US bond prices were under pressure, keeping their yields not far from last week’s peaks.

The 10-year Treasuries yield stood at 3.076 percent, near a seven-year high of 3.128 percent hit on Friday.

“Recent data suggests the US economy is very strong, hardly slowing down in Jan-Mar. The world economy slowed in that quarter but it appears to be rebounding. And recent rises in oil prices are likely to lift inflation expectations further,” said Tomoaki Shishido, senior fixed income analyst at Nomura Securities.

“We expect more selling until the next Fed’s meeting in June,” he said.

In the currency market, higher US yields helped to strengthen the dollar against a wide range of currencies.

The common currency was also hit after two anti-establishment parties pledged to increase spending in a deal to form a new coalition government in Italy.

The dollar maintained an uptrend against the yen, rising 0.5 percent to 110.29 yen, a high last seen in January.

Some emerging market currencies remained fragile. The Indonesian rupiah dropped 0.3 percent to 2 1/2-year lows and the Turkish lira slipped 0.7 percent to record lows.

Oil prices held firm near 3-1/2-year highs, drawing support from easing trade tensions between the world’s two biggest economies.

The market is keeping an eye on Venezuela, where President Nicolas Maduro won a new six-year term, an outcome that could trigger additional sanctions from the United States and more censure from the European Union and Latin America.

Oil prices have been supported by plummeting Venezuelan production, in addition to a solid global demand and supply concerns stemming from tensions in the Middle East.

US crude futures rose 0.8 percent to $71.83 per barrel, near last week’s 3 1/2year high of $72.30 while Brent crude futures notched up 0.8 percent to $79.10 per barrel. It had risen to $80.50 last week, its highest since November 2014.