World stocks rose yesterday, supported by broad gains in Europe and rising oil prices, even though markets across Asia remained in the grip of trade turbulence.

A July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on US products.

President Donald Trump also threatened on Monday to “do something” if the United States was not better treated by the World Trade Organization.

Prospects of a full-blown trade war and relentless yuan weakening – it has fallen 5 per cent in the past two weeks and is near 11-month lows – reportedly forced China into intervention via state-run banks.

“It is by far the biggest (yuan loss) I can remember. Prudence suggests it has to be matched across Southeast Asia because of the competitive implications,” said Bank of New York Mellon strategist Neil Mellor.

“It generates a degree of instability in the market simply by virtue of its scale.”

Among equity markets, Hong Kong dived as much as 3.3 per cent to nine-month lows, hit also by US curbs on China Mobile. Shanghai’s bourse hit a two-year trough but closed higher as the yuan recovered.

The mood was more cheerful in Europe where a pan-European equity index rose 1 per cent, the euro firmed and bond yields climbed after German Chancellor Angela Merkel struck a migration deal with her Bavarian conservative coalition partners.

In the United States, the Dow Jones Industrial Average rose 88.76 points, or 0.37 per cent, to 24,395.94, the S&P 500 gained 7.04 points, or 0.26 per cent, to 2,733.75 and the Nasdaq Composite added 2.71 points, or 0.04 per cent, to 7,570.40.

“The big driver behind US resilience is that tech has been strong,” said Rory McPherson, head of investment strategy at asset manager Psigma.

“Expectations are pretty high for the earnings season, with talk of 20 per cent earnings growth year-on-year.”

US markets are set to close early for the Fourth of July holiday.

Energy stocks have been boosted by Brent crude’s rise past $78 a barrel, Mr McPherson noted. Europe’s tech and energy sectors rose 0.5 and 1 per cent respectively.

That helped MSCI’s world index to rise 0.25 per cent, inching further off 2-1/2 month lows hit last week.

While US growth and company earnings seem unassailable, tit-for-tat tariffs from China and Europe may ultimately prove detrimental for American businesses and jobs.

US bond yields rose slightly amid the easier mood but concern about the trade row has helped push the gap between two- and 10-year yields to the narrowest since 2007.

The dollar retreated 0.4 per cent against a basket of currencies and the easing tensions in Germany helped the euro to gain 0.2 per cent against the greenback.

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