Trade Truce Prompts Relief Rally for Stocks and Oil -- update
By Paul J. Davies
U.S. chip makers looked set to be the big winners in Monday
trading after a thaw in trade relations between the U.S. and China
over the weekend.
The agreement between Beijing and Washington to get talks back
on track and the concessions given to U.S. companies that trade
with Chinese telecommunications firm Huawei Technologies lifted
investor confidence and boosted Asian and Europe stocks earlier in
Skyworks Solutions Inc., a 5G specialist, was the biggest riser
in premarket action, up 6.6%, while Qualcomm Inc. and Broadcom Inc.
also did well, rising 5.8% and 4.9% respectively.
That helped U.S. futures broadly, with the S&P 500 and the
Dow Jones Industrial Average up by more than 1.1% and 1%,
respectively. Changes in equity futures don't necessarily predict
moves after the opening bell.
Technology stocks drove the rise in European markets, with
STMicroelectronics NV up 5.6%. That helped lift the Stoxx Europe
600 by 1%, while Germany's DAX index was up 1.3%.
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.
"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
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 1.8% Monday. Confirmation of an oil deal was
expected after a meeting of members of the Organization of the
Petroleum Exporting Countries later Monday or Tuesday.
The U.S. and Turkey also began to smooth over their differences
at the weekend regarding the latter's move to purchase a Russian
missile defense system. That helped the Turkish lira rise 2.2%
against the dollar.
Haven assets, which tend to rally in times of stress, retreated.
Gold fell 1.3%, 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 2.023% 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 0.2% 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 0.328%, a fraction below Friday's close.
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. Japan's Nikkei 225 Index rose 2.1%.
Shen Hong, Steven Russolillo and Joe Wallace in London
contributed to this article.
Write to Paul J. Davies at firstname.lastname@example.org
(END) Dow Jones Newswires
July 01, 2019 09:00 ET (13:00 GMT)
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