The US dollar gained and equity markets around the world jumped yesterday in a relief rally as fears eased of a trade war between China and the United States after Washington expressed a willingness to negotiate. The dollar rose to a three-week high against the Japanese yen and a 10-week peak versus the Swiss franc, two safe-haven assets that investors buy in times of market uncertainty.
US Treasury yields rose to one-week highs as rising stock markets were a sign of improving risk appetite amid expectations a growing economy will be confirmed today when the closely watched US employment report for March is released.
Major European stock indexes surged 2 per cent or more, with Germany’s exporter-heavy DAX, the market most exposed to China, climbing 2.90 per cent.
MSCI’s all-country world stock index, which tracks shares in 47 countries, gained 1.12 per cent, led by Amazon.com, Apple and Facebook.
“Markets seem to be in relief rally mode and part of this is really driven by the fact we’re not really in a trade war yet,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.
“This is quite small in terms of the impact to the economy, we still have the runway of tax reform that’s coming along,” Mr Ripley said, referring to boost Donald Trump’s new tax code is delivering to corporate earnings.
The pan-European FTSEurofirst 300 index of leading regional shares rose 2.47 per cent.
On Wall Street, the Dow Jones Industrial Average rose 324.01 points, or 1.34 per cent, to 24,588.31. The S&P 500 gained 25.55 points, or 0.97 per cent, to 2,670.24 and the Nasdaq Composite added 65.37 points, or 0.93 per cent, to 7,107.48.
Signs the United States is looking to resolve a trade dispute with China lifted the dollar but limited an advance in oil prices as crude is dollar-priced and a stronger greenback makes oil purchases in other currencies more expensive.
The dollar index rose 0.48 per cent, with the euro down 0.46 per cent to $1.2221. The Japanese yen weakened 0.63 per cent versus the greenback at 107.45 per dollar.
Joe Manimbo, senior market analyst at Western Union Business Solution in Washington, said the dollar was boosted by a view that “Washington and Beijing might broker a trade deal that doesn’t torpedo global commerce or damage the world economy.”
US crude rose 43 cents to $63.80 per barrel and Brent gained 51 cents to $68.53.
Gold prices fell as the apparent willingness to resolve a trade dispute reduced demand for bullion as a place to park money. A stronger dollar also crimped gold as it’s more expensive for users of other currencies.
Yesterday, United States gold futures fell $11.70 to $1,328.50 an ounce.