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Global stocks ride high as 'risk-on' reigns supreme

Reuters  |  LONDON 

By Marc Jones

(Reuters) - World shares and yields rode a renewed surge in risk appetite on Tuesday as investors turned optimistic about U.S.-China trade talks and cheered Washington's deal to avoid another government shutdown.

Tokyo's Nikkei set the tone with its best day of the year so far and, as Europe's traders hauled the STOXX 600 back towards two-month highs set last week, it was little surprise to see Wall Street futures pointing higher.

Germany's DAX jumped as much as 1.3 percent and and were both up 1 percent, though London's FTSE lagged amid UK PLC's ongoing Brexit uncertainty.

The other big focus was the dollar, which hovered at a two-month high having just scored its longest winning streak - eight days straight - in two years.

"We have had two bits of relatively good overnight - optimism about the U.S. shutdown not resuming and optimism about a trade deal," said

"Equities are higher, yields are a little bit higher, yen and Swiss franc weakest of the major currencies, so it's sort of risk-on rules OK!"

Another risk-sensitive currency the Australian dollar also gained and as well as the and Swiss franc, U.S. Treasuries and German Bunds, which are also traditional safety-plays, also sold off.

Juckes said he reckoned there was now a 75 percent chance that a ratcheting up of U.S. tariffs on Chinese goods will now be avoided and a 95 percent chance that another shutdown will be averted.

Those odds got a boost after U.S. lawmakers reached a tentative deal on border security funding, though aides did caution that it did not contain the $5.7 billion wants to build a wall on the Mexican border.

U.S. and Chinese officials had also expressed hopes that the new round of talks, which began in on Monday, would bring them closer to easing their near year-long trade war.

and are trying to hammer out a deal before a March 1 deadline, without which U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

"There will be no winner in a trade war. So at some point they will likely strike a deal," said Mutsumi Kagawa, at in


Underscoring the dramatic turn this year, of America said emerging markets - which in 2018 suffered one of their worst years on record - were now the most "crowded trade" among its clients with $625 billion of asset-buying firepower.

S&P 500 futures, meanwhile, were up after a mixed Monday, with trade-sensitive industrial bellwethers, and and some major chipmakers all up in pre-market moves. [.N]

had nudged higher overnight but it was Japan's Nikkei that caught the eye as its scored its best day of the year so far with a 2.6 percent surge, having started the day at a one-month low.

With the yen backtracking, shares of exporters such as automakers and had led the charge. Separately, Deutsche noted it was also 20 years since cut interest rates to zero, something now standard in large parts of [.T]

The yen's weakness came as the dollar consolidated its longest unbroken rally in two years against a basket of six major currencies.

The dollar popped up to a six-week high of 110.65 yen. In contrast, the euro dropped to as low as $1.1267, its weakest in 2-1/2 months, and last traded at $1.12790.

Even Klaas Knot, one of the ECB's arch hawks, was suddenly sounding cautious about the central ending almost a decade of heavy euro zone stimulus. "At this moment a wait-and-see attitude is probably the optimal attitude," Knot said in an interview with

Although the Federal Reserve's dovish turn dented the dollar earlier this month, analysts also note the U.S. currency still has the highest yield among major FX peers and that the Fed continues to shrink its balance sheet.

"It has been particular strong as of late again because of the decoupling between the U.S. and the rest of world if you look at (economic) surprise indicators," Andrey Kuznetsov, a portfolio manager at Hermes Investment Management, said.

In commodity markets, also jumped up as traders weighed support from OPEC-led supply restraint and a slowdown in the global

U.S. crude futures traded at $53.64 per barrel, up $1.42. Brent crude rose $1.20 percent to $62.89 per barrel. Gold was a touch stronger too at $1,314 an ounce.

(Additional reporting by in and in London; Editing by Mark Heinrich)

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

First Published: Tue, February 12 2019. 19:17 IST