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Global Markets: Stocks surge after China-U.S. trade truce, Wall Street set for jump

Reuters  |  LONDON 

By Virginia Furness

LONDON (Reuters) - A truce between and Chinese leaders on trade tariffs boosted global markets on Monday, fuelling an advance of nearly one percent by world stocks, setting up gains on Wall Street and pushing emerging-market currencies higher against the dollar.

Equity futures showed all three indexes set for a strong session, with the tech-heavy Nasdaq seen opening 2.3 percent higher while futures for and S&P500 rose 1.6 to 1.9 percent.

European benchmarks rallied almost across the board. Germany's DAX - the most sensitive to and trade war fears - led the way with a 2.5 percent rise to its highest since Nov. 14.

The gains came after and the agreed at the weekend to halt additional tariffs. The deal should keep their trade war from escalating as they try to bridge differences with talks aimed at reaching a deal within 90 days.

also said "has agreed to reduce and remove tariffs on cars coming into China from the Currently the tariff is 40 percent". That helped boost European autos more than 4 percent.

The trade truce was the latest "circuit breaker" needed to trigger a return to risk appetite, said Guillermo Felices, in the Multi-Asset, Quantitative and Solutions team at BNP Paribas Asset Management,

"The first was markets pricing in a more dovish Fed, the second, more aggressive policy stimulus by the Chinese authorities and the third, easing trade tensions," he said.

Felices cautioned, however, that negotiations had reached a "ceasefire" rather than lasting peace.

"China can deliver on the easy things like buying more agriculture as they need those goods, but when you go into the territory of intellectual property, and industrial and technology policy, you are clashing with China's long-term aims," he said.

MSCI's all-country world index climbed 0.8 percent in its sixth straight day of gains and hit its highest since Nov. 9. Emerging-market equities rose two percent and were set for their strongest day in a month.

Asian shares kicked off the rally, with Chinese markets rising more than 2.5 percent and Japan's Nikkei soaring to six-week highs.

The risk-on mood saw MSCI's index of emerging-market currencies rise 0.7 percent, led by China's yuan, which saw its biggest daily gain since Februeary 2016.

However, the dollar started to recover after slumping as much as half a percent earlier against a basket of currencies. By 1145 GMT, it was just 0.2 percent lower, knocking the euro off the day's highs.

Sterling, meanwhile, dropped as Brexit nerves returned. Against the dollar, the pound fell to its lowest since October at $1.2708, down nearly 0.7 percent from the day's highs. Against the euro, it slipped 0.3 percent to 89.05 pence.

"Until the votes on the deal next week, we are going to see a steady drumbeat of Brexit headlines, which is going to keep the pound weak," said, referring to a Dec. 11 lawmakers' vote on Theresa May's agreement on leaving the

However, the dollar has already come under some pressure from a recent shift by the U.S. Federal Reserve to a slightly more dovish stance. Comments by Federal Reserve were interpreted by markets as hinting at a slower pace of rate increases.

Powell was scheduled to testify later this week to a congressional

The latest market rally would not bring a return to a more hawkish Fed stance, said. "We would need to see some rebound in economic activity to lift expectations of more rate hikes," Hense said.

yields pulled back from Friday's over-two-month lows. Ten-year yields traded around 3.03 percent.

Germany's 10-year government bond, the benchmark for the euro area, initially rose four basis points to 0.347 percent, but eased back to 0.32 percent.

Yields on riskier southern European bonds were down across the board, though Italian bonds trimmed some gains after the revealed Italy's share of ECB capital would be cut slightly.

Ten-year yields stayed close to two-month lows, however.

Elsewhere, soared more than five percent after posting its weakest month in more than 10 years in November, losing more than 20 percent as global supply outstripped demand.

For Live Markets blog on European and UK stock markets open a window on Eikon by pressing F9 and type in 'Live Markets' in the

(Reporting by Virginia Furness, additional reporting by Wayne Cole and Hideyuki Sano in and Tokyo; editing by Jon Boyle, Larry King)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, December 03 2018. 17:55 IST