Signs of movement in the US-China trade stand-off and a rate hike in emerging market trouble spot Turkey sent an index of global stocks higher yesterday as risk appetite returned.
Wall Street opened higher, following broad gains in Europe and Asia’s major markets, after news that US President Donald Trump’s administration had put out feelers to Beijing for a new round of trade talks.
Turkey’s central bank also made a rare show of independence, ignoring a fresh bashing from President Tayyip Erdogan and jacking up its interest rates by more than one-third to 24 per cent.
MSCI’s 47-country world index rose for a fourth straight day of gains, gaining 0.72 per cent.
The pan-European FTSEurofirst 300 index rose 0.22 per cent, while MSCI’s broad emerging market stock index leapt 1.56 per cent.
The Dow Jones Industrial Average rose 177.48 points, or 0.68 per cent, to 26,176.4, the S&P 500 gained 16.18 points, or 0.56 per cent, to 2,905.1 and the Nasdaq Composite added 68.69 points, or 0.86 per cent, to 8,022.92.
The dollar, which has been a safe haven from trade disputes, fell 0.31 per cent against a basket of other major currencies.
US consumer prices rose less than expected in August as increases in gasoline and rents were offset by declines in healthcare and apparel costs, and underlying inflation pressures also appeared to be slowing, data showed yesterday.
A slackening of inflation could slow the Federal Reserve’s pace of rate hikes, and US bond yields fell to session lows after the release of the consumer price report, before rebounding. Benchmark 10-year notes dropped 1/32 in price to yield 2.9645 per cent, compared with 2.963 per cent late on Wednesday.
The euro rose 0.54 per cent to $1.1687. European Central Bank president Mario Draghi said the strength of the European economy continues to support confidence but added that inflation is likely to hover at current levels.
The day’s big move in currency markets occurred in Turkey’s lira.
It fell three per cent after Mr Erdogan called for rate cuts and then surged to be up three per cent on the day when those calls were ignored.
The lira’s rally comes after a more than 40 per cent slump against the dollar this year, caused in part by a diplomatic disagreement between Ankara and Washington.
Inflation in Turkey is now almost 20 per cent and the crisis there has spread to some other emerging market countries with weak economic fundamentals, such as sizable current account deficits.
Meanwhile, among commodities, oil prices fell on doubts about growth of demand for fuel, reversing some of the strong gains from the previous session.
US crude dropped 1.02 per cent to $69.65 per barrel and Brent was last at $79.19.