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 Beijing and Washington agreed to get trade talks back
on track, lifting 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 5.9%. That helped lift the Stoxx Europe
600 by 0.8%, while Germany's DAX index was up 1.2%.
U.S. chip makers also benefited in premarket trading after
specific concessions were given to U.S. companies that trade with
Huawei Technologies Co., the Chinese telecommunications company at
the center of the dispute over technology and security between the
two countries. Qualcomm Inc. and Broadcom Inc. were both up about
5% before U.S. markets opened.
That helped U.S. futures broadly, with 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
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 outcome of the weekend's meeting of global
leaders 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%. Shares in London were also
higher, with the FTSE 100 rising 1.1%.
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 1.4%, the Japanese yen weakened slightly against the
dollar and 10-year U.S. Treasurys fell in price. That lifted
yields, which move inversely to prices, to 2.017% from 1.998%.
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 0.3% higher.
Yields on major European sovereign bonds slipped slightly after
government heads failed to reach an agreement on 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 0.334%, a fraction below Friday's close.
Joe Wallace in London contributed to this article.
Write to Shen Hong at email@example.com and Steven Russolillo at
(END) Dow Jones Newswires
July 01, 2019 06:21 ET (10:21 GMT)
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