Growing hopes for US-China trade boost stocks, dollar weak

US Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain's departure. — Reuters pic
US Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain's departure. — Reuters pic

NEW YORK, Oct 29 ― An index of global stock markets rallied to a 21-month high yesterday, boosted by growing hopes for a US-China trade deal and the view that the US Federal Reserve this week will deliver its third interest rate cut for 2019.

US Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain's departure. Improved risk sentiment also sapped demand for the safe-haven US dollar, the Japanese yen and gold.

MSCI's All Country World Index, which tracks shares across 47 countries, was up 0.44 per cent to its highest intraday level since February 2, 2018.

US and Chinese officials are “close to finalising” parts of a trade agreement after high-level telephone discussions on Friday, the US Trade Representative's office and China's Commerce Ministry said. The USTR provided no details on areas of progress.

US President Donald Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile.

“It just seems like the things that would disrupt the rally ― tightening monetary policy (are) off the table. Some kind of big battle with the Chinese seems to be off the table, some kind of political upheaval seems be off the table,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

“All of that means the line of least resistance is higher.”

Strong results from US companies have boosted risk sentiment, and investors are hopeful the Fed will cut interest rates at its meeting this week.

On Wall Street, the S&P 500 closed at a record high. Microsoft Corp shares boosted all three main indexes, after the tech giant beat Amazon.com Inc for the Pentagon's US$10 billion (RM41.8 billion) cloud computing contract.

The Dow Jones Industrial Average rose 132.66 points, or 0.49 per cent, to close at 27,090.72, the S&P 500 gained 16.87 points, or 0.56 per cent, to finish at 3,039.42 and the Nasdaq Composite added 82.87 points, or 1.01 per cent, to end at 8,325.99.

The pan-European STOXX 600 index rose 0.25 per cent to close at its highest since January 2018, helped by trade-exposed auto and mining stocks.

In currency markets, the US dollar slipped as trade deal optimism reduced demand for safe haven currencies.

“Positive trade headlines continue to support our view that trade tensions are easing,” said Win Thin, global head of FX strategy at Brown Brothers Harriman.

The dollar index, which measures the greenback against a basket of six major currencies was 0.09% lower on the day.

Sterling rose 0.25 per cent after British lawmakers rejected Prime Minister Boris Johnson's bid to end the political paralysis around Brexit with a December 12 election.

The vote took place after the European Union agreed to a three-month flexible Brexit delay.

The benchmark 10-year US Treasury yield was last up 4.5 basis points to 1.8455 per cent.

Oil prices eased after four days of gains as worries about weak Chinese industrial data offset hopes oil demand will rise on a Sino-American trade deal.

Brent crude settled down 45 cents, or 0.7 per cent at US$61.57 a barrel, while US West Texas Intermediate crude settled 85 cents, or 1.5 per cent, lower at US$55.81.

Gold slipped as trade hopes limited gains after the precious metal jumped 1 per cent in the previous session. Spot gold was down 0.77 per cent at US$1,492.6949 per ounce. ― Reuters

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