Trade Truce Prompts Relief Rally for Stocks, Oil, Yuan -- Update
By Shen Hong in Shanghai and Steven Russolillo in Hong Kong
Global stocks and oil rallied while U.S. Treasury yields rose
Monday after the weekend's cease-fire on trade between Beijing and
Washington lifted investor confidence.
Traders and analysts called the moves a relief rally, and
cautioned that frictions around commerce between the world's two
largest economies were likely to be long-lasting. A better economic
outlook with less trade-driven uncertainty could also mean
hoped-for interest-rate cuts won't be realized.
Technology stocks drove the rise in European markets, with
STMicroelectronics NV up 5.1%. That helped lift the Stoxx Europe
600 by 0.9%, while Germany's DAX index was up 1.4%. Shares in
London were also higher, with the FTSE 100 rising 0.9%.
In China, the benchmark Shanghai Composite Index gained 2.2% on
the diminished tensions between the U.S. and China, despite a set
of disappointing readings for Chinese economic activity. Weekend
data showed factory activity in China contracted for the second
straight month in June.
Michael Kelly, global head of multiasset at PineBridge
Investments, said the meeting's outcome was "a modest favorable
surprise for markets." However, issues about intellectual property
were very unlikely to be solved in the coming talks, he added.
Others were similarly cautious. "We appear to have arrived at
almost exactly the minimum positive outcome to justify financial
markets' positive sentiment," said Andrew Jackson, head of fixed
income at Hermes Investment Management
Japan's Nikkei 225 Index rose 2.1%. U.S. futures markets showed
the S&P 500 and the Dow Jones Industrial Average both up by
more than 1%. Changes in equity futures don't necessarily predict
moves after the opening bell.
It wasn't just the trade talks that advanced in the meeting of
global leaders in Japan this weekend. Russia and Saudi Arabia
brokered a deal on cuts to oil production, helping to send Brent
crude futures up 2.8% Monday. The U.S. and Turkey also began to
smooth over their differences regarding the latter's move to
purchase a Russian missile defense system: That helped the Turkish
lira rise 1.5% against the dollar.
Haven assets, which tend to rally in times of stress, retreated.
Gold fell nearly 1.7%, the Japanese yen weakened slightly against
the dollar, and 10-year U.S. Treasurys fell in price. That pushed
up yields, which move inversely to prices, to 2.025% from
The mood wasn't strictly bullish however, as the U.S. dollar,
which often weakens when investors get more positive on the global
economy, was stronger against a host of currencies. The WSJ dollar
index was 0.2% higher.
Additionally, yields on major European government bonds slipped
slightly after government heads failed to reach an agreement on a
series of top jobs in the European Union, including new presidents
for the European Commission and the European Central Bank. The
10-year German bund was at minus 0.328%, a fraction below Friday's
Joe Wallace in London contributed to this article.
Write to Shen Hong at firstname.lastname@example.org and Steven Russolillo at
(END) Dow Jones Newswires
July 01, 2019 05:13 ET (09:13 GMT)
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