Stocks jump, Treasury yields soar on news of U.S.-China trade talks

Business

NEW YORK (Reuters) – Stocks worldwide hit one-month highs and U.S. Treasury yields surged on Thursday as renewed U.S.-China trade optimism and upbeat U.S. economic data boosted risk appetite and lured investors away from safe-haven assets.

FILE PHOTO: Traders work on the trading floor at the New York Stock Exchange (NYSE) in New York City, U.S., September 3, 2019. REUTERS/Andrew Kelly

The announcement that top negotiators from the United States and China will meet in early October in Washington raised hopes of a possible resolution to the two countries’ brutal trade war that has shaken markets and wreaked havoc on the global economy.

The news built on Wednesday’s tide of optimism after the British parliament blocked a no-deal exit from the European Union and Hong Kong scrapped the extradition bill that sparked riots.

“Yesterday we had two big geopolitical risks diminish, Hong Kong and Brexit,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “And today we had trade, the biggest of them all, diminish.

“It’s clear that stock prices are very much correlated and influenced by the political winds surrounding trade,” Pursche added.

U.S. private payrolls increased in August at their fastest pace in four months, according to ADP, blowing past analyst estimates ahead of Friday’s more comprehensive jobs report from the Labor Department.

A separate report showed the U.S. services industry rebounded last month to its fastest expansion since February, bouncing back from a three-year low, according to the Institute for Supply Management’s non-manufacturing purchasing managers index (PMI).

By midafternoon, the Dow Jones Industrial Average rose 388.35 points, or 1.47%, to 26,743.82, the S&P 500 gained 36.08 points, or 1.23%, to 2,973.86 and the Nasdaq Composite added 119.76 points, or 1.5%, to 8,096.64.

Euro zone and emerging markets stocks charged higher on the renewed trade hopes.

The pan-European STOXX 600 index rose 0.72% and MSCI’s gauge of stocks across the globe gained 1.11%.

Emerging market stocks rose 1.22%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.09% higher, while Japan’s Nikkei rose 2.12%.

News of the impending trade talks sent U.S. Treasury yields soaring on hopes that a long-elusive deal might remove an impediment to growth.

Benchmark 10-year notes last fell 31/32 in price to yield 1.5636%, from 1.459% late on Wednesday.

The 30-year bond last fell 73/32 in price to yield 2.055%, from 1.957% late on Wednesday.

The dollar held its losses against a basket of world currencies following the upbeat U.S. jobs data. Earlier, the news of renewed trade talks weighed on the dollar and the yen while boosting riskier currencies.

The pound sterling, however, rose to its highest level against the greenback in over a month on hopes that a no-deal Brexit could be avoided.

The dollar index fell 0.04%, with the euro up 0.04% to $1.1037.

The Japanese yen weakened 0.50% versus the greenback at 106.94 per dollar, while Sterling was last trading at $1.2317, up 0.55% on the day.

The tide of trade optimism and a sharp decrease in U.S. crude inventories lifted oil prices.

U.S. crude rose 0.68% to $56.64 per barrel and Brent was last at $61.26, up 0.92% on the day.

Gold prices slid as signs of a trade war thaw and stronger-than-expected U.S. economic data sent investors to riskier assets.

Spot gold dropped 2.1% to $1,520.57 an ounce.

Copper rose 1.63% to $5,841.50 a tonne.

Three-month aluminum on the London Metal Exchange rose 0.73% to $1,788.00 a tonne.

Reporting by Stephen Culp; Editing by Dan Grebler

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