Stock bounce masks unease over Brexit and growth

Stocks jumped yesterday as investors clung to hopes of a détente in the China-US trade war and picked through the rubble of conflagrations in other top economies, with heightened uncertainty over Brexit and French protests.

A report China is moving to cut import tariffs on American-made cars drove European stocks to extend gains strongly as auto stocks jumped and the market interpreted this as a sign China is ready to make concessions on trade.

The report came after China’s Vice Premier Liu He exchanged views on the next stage of trade talks with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. The Dow Jones Industrial Average rose 296.65 points, or 1.21 per cent, at the open to 24,719.91.

The S&P 500 opened higher by 26.72 points, or 1.01 per cent, at 2,664.44. The Nasdaq Composite gained 101.13 points, or 1.44 per cent, to 7,121.66 at the opening bell. Eurozone stocks rose 1.8 per cent and Germany’s DAX climbed 2 per cent while Britain’s FTSE 100 rose 1.6 per cent. Germany’s DAX, the most China-sensitive market in Europe, last week entered bear market territory. MSCI’s world equity index gained 0.4 per cent — set for its first day of gains after a five-day losing streak.

Sterling, meanwhile, still floundered near 20-month lows as the market sought clarity on the next steps for Brexit after Britain’s prime minister postponed a vote on her deal.

Sterling hesitantly rose 0.4 per cent to $1.2610 as traders sought to price in a range of possibilities after Prime Minister Theresa May’s abrupt decision to postpone a parliamentary vote on her Brexit agreement on Monday, a move that sent the pound spiralling down to $1.2505.

Bond markets were focused on France as investors fretted over fiscal spending after the government announced concessions aimed at defusing weeks of often violent protests.

President Emmanuel Macron announced wage rises for the poorest workers and tax cuts for pensioners.