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Global Markets: Stocks rally before earnings, trade war jolt boosts dollar

Reuters  |  LONDON 

By Tom Finn

LONDON (Reuters) - World stocks rose for a second consecutive week on Friday as investors prepared for an expected run of strong earnings in the United States, although fears about the U.S.-trade conflict kept gains in check and pushed the dollar higher.

Expectations of a bumper U.S. earnings season and that China's overall global export growth beat expectations led European shares up on Friday with industrials and technology sending the pan-European up 0.2 percent.

Markets appeared broadly risk-friendly as a weakening safe-haven yen helped lift Japan's Nikkei stock index 2 percent. That followed the S&P500 hitting four-month highs on Wall Street overnight.

Yet fears about the impact of an escalating U.S.-trade war continue to cloud the outlook, encouraging investors into the safety of the dollar.

Data showing China's trade surplus with the swelling to a record in June could further inflame a trade dispute with

"The record surplus with the U.S. will inevitably get top billing ... China's exporters have been front-loading exports to beat the imposition of tariffs, implying a relatively sharp drop in coming months," said.

With investors braced for the impact of tit-for-tat tariffs, one of China's main indexes edged lower and China's yuan headed for its fifth straight week of losses.

While has vowed to retaliate against the proposed new U.S. tariffs -- 10 percent on $200 billion of Chinese goods -- the lack of a specific response to date has sparked global relief.

On Friday, S&P500 futures rose to a five-month high on expectations of solid earnings growth among U.S. firms despite the trade war concern.

RENEWED TALKS?

Offering some reassurance to investors, said on Thursday the and China could reopen trade talks if was serious about structural reforms of its business practices.

"Some have suggested that Chinese officials are easing back their rhetoric with the intention of going back to the negotiation table, perhaps in light of increased concerns about economic impacts," analysts wrote in a note on Friday.

The options available to include boycotting American goods, selling off U.S. or sharply devaluing the yuan.

In commodity markets, prices have had a wild week with both the main benchmarks suffering heavy losses as traders focused on the return of Libyan to the market.

prices fell on Friday, with Brent crude dropping 35 cents to $74.10 a barrel and heading for a weekly fall of nearly 4 percent.

A warning on spare capacity by the International Energy Agency (IEA) helped Brent recoup some losses on Thursday.

Copper eased about half a percent on Friday and was poised for a fifth straight weekly fall, its longest decline since 2015, on concerns about weaker demand in face of the U.S.-China trade dispute.

The dollar, which has been a safe haven amid global uncertainty over trade, touched 112.795 against the yen, its highest level in six months, boosted by expectations of higher U.S. inflation.

The greenback was the strongest major this week and the dollar index, which tracks the against a basket of six major rivals, was up 0.4 percent at 95.142. The euro fell to a nine-day low of $1.1629.

Analysts said the dollar's rally could soon run out of steam, however.

"The big risk (for the dollar) that we see is the potential for U.S. GDP growth expectations to adjust lower as investors come to terms with the idea that the U.S. is not immune to a global trade war," Viraj Patel, a at ING, said in a note.

Sterling fell 0.8 percent to a 1-1/2 week low on Friday of $1.3103 as a resurgent dollar and comments by U.S. that a possible U.S.-British trade deal was probably dead sapped demand for the pound.

There was plenty of pain for emerging market stocks and currencies, including the biggest weekly loss for Turkey's lira since the height of the financial crisis a decade ago.

The lira has lost 22 percent of its value against dollar this year, reflecting investor concern about monetary policy and by Turkish Tayyip Erdogan, who appointed his as minister this week.

(Editing by Louise Ireland and Catherine Evans)

(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: Fri, July 13 2018. 17:17 IST
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