Progress in US-China trade talks sparks world stock rally

A US 100-dollar banknote with a portrait of Benjamin Franklin and a Chinese 100-yuan banknote with a portrait of late Chinese Chairman Mao Zedong are seen in the picture illustration in Beijing, China, January 21, 2016. — Reuters pic
A US 100-dollar banknote with a portrait of Benjamin Franklin and a Chinese 100-yuan banknote with a portrait of late Chinese Chairman Mao Zedong are seen in the picture illustration in Beijing, China, January 21, 2016. — Reuters pic

NEW YORK, Feb 15 — Progress in the US-China trade talks helped send world stock markets broadly higher today and pulled investors out of the safety of government bonds.

Europe’s broad Stoxx 600 index rallied 1.4 per cent. The Dow Jones Industrial Average rose 443.86 points, or 1.74 percent, to 25,883.25, the S&P 500 gained 29.87 points, or 1.09 per cent, to 2,775.6 and the Nasdaq Composite added 45.46 points, or 0.61 per cent, to 7,472.41.

China and the United States reached a consensus in principle on some key issues during the talks, China’s state news agency Xinhua said today. Negotiations will continue next week in Washington as investors hope for an end to the trade war between the world’s two largest economies.

“The next potential steps in the US protectionist push could be pivotal for the global outlook,” Bank of America Merrill Lynch economists wrote in a note. “With the trade war already starting to hurt the US, we expect the Trump Administration to pull its punch.”

MSCI’s gauge of stocks across the globe gained 0.82 per cent. The index is up nearly 10 per cent for the year.

Emerging markets were set for their first back-to-back weekly loss since late last year. The MSCIEF index of emerging- market stocks dropped 0.7 per cent, leaving it up approximately 7.6 per cent for the year.

Though there were signs of progress in the trade discussions, some investors remained cautious on whether tariffs would soon be eliminated.

“We expect that the longer-term direction of tariffs on imports from China is likely to be downward, but we expect this to be a gradual process and believe that some of the recently imposed tariffs might still be in effect through the 2020 election,” economists at Goldman Sachs wrote in a note.

The broad stock rallies helped pull investors out of the safety of government bonds, sending yields higher. Benchmark 10-year US Treasury notes last fell 1/32 in price to yield 2.6626 percent, from 2.659 per cent late on Thursday.

US President Donald Trump signed a bill Friday that prevented another partial federal government shutdown by funding several agencies that otherwise would have closed on Saturday morning.

The dollar index fell 0.11 per cent, with the euro down 0.05 per cent to US$1.1293 (RM776).

Crude oil reached 2019 highs above US$65 per barrel after Opec-led supply cuts and a bigger-than-expected cut by Saudi Arabia this week encouraged investors.

The global Brent benchmark gained 2.2 per cent to US$66.01 per barrel. It has risen over 4.5 per cent this week.

US crude rose 2.1 per cent to US$55.58 per barrel. — Reuters