Stocks surge after trade truce

Stocks surge after trade truce

A truce between US and Chinese leaders on trade tariffs boosted global markets yesterday, fuelling an advance of nearly one percent by world stocks, setting up gains on Wall Street and pushing emerging-market currencies higher against the dollar.

Equity futures showed all three New York indexes set for a strong session, with the tech-heavy Nasdaq seen opening 2.3 per cent higher while futures for Dow Jones and S&P500 rose 1.6 to 1.9 per cent.

European benchmarks rallied almost across the board. Germany’s DAX – the most sensitive to China and trade war fears – led the way with a 2.5 per cent rise to its highest since November 14.

The gains came after China and the United States agreed at the weekend to halt additional tariffs. The deal should keep their trade war from escalating as they try to bridge differences with talks aimed at reaching a deal within 90 days.

US President Donald Trump also said “China has agreed to reduce and remove tariffs on cars coming into China from the US Currently the tariff is 40 per cent”. That helped boost European autos more than 4 per cent.

The deal should keep their trade war from escalating

Yesterday, MSCI’s all-country world index climbed 0.8 per cent in its sixth straight day of gains and hit its highest since November 9. Emerging-market equities rose two percent and were set for their strongest day in a month.

Asian shares kicked off the rally, with Chinese markets rising more than 2.5 per cent and Japan’s Nikkei soaring to six-week highs.

The risk-on mood saw MSCI’s index of emerging-market currencies rise 0.7 per cent, led by China’s yuan, which saw its biggest daily gain since February 2016.

However, the dollar started to recover after slumping as much as half a percent earlier against a basket of currencies.

Sterling, meanwhile, dropped as Brexit nerves returned. Against the dollar, the pound fell to its lowest since October at $1.2708, down nearly 0.7 per cent from the day’s highs. Against the euro, it slipped 0.3 percent to 89.05 pence.

US Treasury yields pulled back from Friday’s over-two-month lows. Ten-year yields traded around 3.03 per cent.

Germany’s 10-year government bond, the benchmark for the euro area, initially rose four basis points to 0.347 per cent, but eased back to 0.32 per cent.

Elsewhere, oil soared more than five percent after posting its weakest month in more than 10 years in November, losing more than 20 per cent as global supply outstripped demand.

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