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Global Markets: Stocks greet sign of trade truce extension with glee

Reuters  |  LONDON 

By Helen Reid

LONDON (Reuters) - Investors hungry for progress on resolving a U.S.-trade war seized on U.S. Donald Trump's comment that he could let a March 1 deadline for a deal with "slide", taking this as a cue to buy stocks and sell bonds on Wednesday.

As and Trade prepared for talks in to hammer out a trade deal, markets cheered the signal that there could be an extension to a tariff truce.

European shares followed Asia's lead to rise 0.8 percent while S&P 500 futures rose 0.4 percent and Nasdaq futures gained 0.5 percent, pointing to a strong Wall Street open.

U.S. figures which confirmed consumer prices were unchanged for a third straight month in January helped boost the STOXX 600 to the day's high and gave U.S. futures a nudge higher.

Investors welcomed this further sign U.S. is cooling as adding to the Federal Reserve's argument against raising rates.

"The Fed's new reaction function is they need to see inflationary pressures before they hike again, and clearly we've seen those inflationary pressures aren't there," said Mohammed Kazmi, at in

European chemicals, carmakers, and luxury goods saw the biggest gains as investors snatched stocks whose valuations have been hit by trade tariffs and a slowdown in

China's blue-chip CSI 300 rose around 2 percent to a four-month high overnight, with IT shares leading gains.

Trump said on Tuesday he could see letting the March 1 deadline for reaching a trade agreement with China "slide for a little while" if the two sides were close to a deal.

He added, though, he is "not inclined" to delay raising tariffs.

"There's still a level of uncertainty there but at least the rhetoric does not show he is digging his heels in, so the market has quite rightly taken it as a positive," said Justin Onuekwusi, fund Management.

"But of course the key thing is he can change his mind."

Investors remained concerned about underlying trends of slowing economic growth and weaker earnings. Analysts have slashed their 2019 earnings growth estimates for developed world stocks from around 10 percent to 5 percent.

Investors went back into risky assets and sold safe-haven government bonds, driving yields up. The 10-year yield hit a one-week high at 2.7060 percent.

In Europe, political uncertainty in bubbled up.

Spain's IBEX lagged the market and Spanish bond yields rose after parliament rejected the Socialist government's 2019 budget proposal, raising the chances of a snap

Risk assets have also been helped up by central banks' dovish shift.

The Federal Reserve will chart plans to stop letting its bond holdings roll off "at coming meetings," said on Tuesday, signaling another major policy shift for the Fed after pausing interest rate hikes.

"Mester's comments follow on quite clearly from what Powell said at the recent press conference, which was already quite a dovish shift which the market wasn't expecting," said UBP's Kazmi.

"Everyone wants to catch this rally because they know at some point it will fade, there will have to be some sort of adjustment later this year because this is pretty much as dovish as [the Fed] can get without moving to a rate cut."

Progress on another issue unnerving markets - the shutdown - also provided a boost to risk appetite.

The Cboe Volatility Index, Wall Street's so-called "fear gauge," dropped overnight to 14.95, its lowest level since October.

The U.S. dollar managed a 0.2 percent rise to 96.930 after the figures.

Slipping deadlines were front and centre not only on the trade war front but also in Brexit.

Sterling briefly spiked half a percent on Wednesday, propelled by large purchase orders executed in a thin market, while renewed suggestions of a delay to Britain's exit from the also lifted sentiment on the currency.

Emerging market stocks faltered, trading flat on the day. BAML on Tuesday said investors saw emerging markets as the "most crowded" trade, for the first time ever.

In commodities, surged after OPEC said it cut production sharply in January, and as U.S. sanctions hit Venezuela's

London copper prices eyed their first session of gains in five as hopes of a trade deal soothed concerns over the in China, the world's biggest metals consumer.

(Reporting by Helen Reid, Additional Reporting by and Tommy Wilkes, Editing by and Toby Chopra)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, February 13 2019. 19:40 IST
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