Equities inch higher on U.S.-China talks report

By Laila Kearney

NEW YORK (Reuters) - Global stock markets inched up on Tuesday helped partly by a report that the United States and China were seeking to resume talks to defuse the battle over import tariffs, while the U.S. dollar rose against the yen after the Bank of Japan said it intends to keep interest rates low.

Representatives of U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have been speaking privately as they seek to restart negotiations and avoid a full-scale trade war, Bloomberg reported, citing sources.

The White House, the Treasury and the U.S. Trade Representative's office declined to comment but Mnuchin has repeatedly said in recent weeks he was ready to restart talks if China was prepared to make "meaningful changes" to its trade and technology transfer policies.

A public comment period on the proposed U.S. tariffs of 25 percent on a further $16 billion of Chinese imports ends on Tuesday.

"The most important influence on the markets today is some tempering of the trade war escalation," said Bill Northey, senior vice president at U.S. Bank Wealth Management in Helena, Montana.

By the close, the Dow Jones Industrial Average rose 108.36 points, or 0.43 percent, to 25,415.19, the S&P 500 gained 13.69 points, or 0.49 percent, to 2,816.29 and the Nasdaq Composite added 41.79 points, or 0.55 percent, to 7,671.79.

The pan-European FTSEurofirst 300 index of leading regional shares closed up 0.24 percent while MSCI's gauge of stocks across the globe gained 0.18 percent.

Regional indexes for Britain's FTSE 100 <.FTSE>, Germany's DAX <.GDAXI> and France's CAC 40 <.FCHI> all climbing.

The U.S. equities market has withstood the recent sell-off in technology stocks and fears of a full-blown trade war remarkably well, said Hank Smith, co-chief investment officer at Haverford Trust in Radnor, Pennsylvania.

U.S. President Donald Trump pays attention to the stock market and if there were a significant sell-off on trade tariff headlines, Smith said, Trump would reverse positions.

"The economy has momentum to withstand these tit-for-tat trade spats that are going on right now. The market is, at least for now, seeing this as negotiations as opposed to the beginning of an all out-out global trade war," Smith said.

Meanwhile, Bank of Japan reassurances that it will maintain super-easy monetary policies for an "extended period of time" pushed the yen down and bond yields lower worldwide.

The U.S. dollar was 0.69 percent higher against the yen , its best day in nearly three weeks after the BOJ said it would keep rates "very low" in comments that brought some relief to a market that had braced for bigger changes. The benchmark 10-year Japanese government bond dropped five basis points after the announcement.

Investors await policy meetings of the U.S. Federal Reserve on Wednesday and the Bank of England on Thursday.

"We still have a decent amount of news ahead of us," said George Goncalves, head of U.S. rate strategy at Nomura Securities International.

Benchmark 10-year U.S. Treasury notes last rose 4/32 in price to yield 2.9617 percent.

Oil prices fell, marking the largest monthly decline in two years, on supply worries after OPEC output reached a 2018 high in July.

October Brent crude futures fell $1.34 to settle at $74.21 a barrel. The September contract LCOU8, which expires later on Tuesday, settled at $74.25. U.S. crude futures CLc1 fell $1.37, or nearly 2 percent, to settle at $68.76.

(Additional reporting by Herb Lash, Andres Guerra Luz and Kate Duguid in New York and David Lawder in Washington; Editing by Nick Zieminski and Steve Orlofsky)