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Home / Business / Trade Truce Prompts Relief Rally for Stock and Oil

Trade Truce Prompts Relief Rally for Stock and Oil



Global stocks and oil rallied while US treasury yields rose Monday after Beijing and Washington agreed to bring trade negotiations back on track and lifted investor confidence.

Traders and analysts called the movements a relief rally and warned that the friction around trade between the world's two largest economies was probably long-lasting. A better economic outlook with less trading-driven uncertainty may also mean that hopes that interest rate cuts will not be realized.

Technological stocks drove the increase in European markets, with

STMicroelectronics

NV up 5.9%. This helped lift the Stoxx Europe 600 by 0.8%, while Germany's DAX index rose by 1.2%.

U.S. Chip makers have also benefited in premarket trading after certain concessions were given to US companies dealing with Huawei Technologies Co., the Chinese telecommunications company in the middle of the technology and security dispute between the two countries.

Qualcomm
Inc.

and

Broadcom
Inc.

were both up about 5% before US markets opened.

It helped US futures to a large extent, with the S & P 500 and Dow Jones Industrial Average more than 1

%. Changes in equity futures do not necessarily foresee movements after the opening clock.

In China, the benchmark Shanghai Composite Index achieved 2.2% of the reduced tensions between the United States and China, despite a number of disappointing Chinese economic activity readings. Weekend data showed factory activity in China which was contracted for the second straight month in June.

Michael Kelly, global leader of the multiasset at PineBridge Investments, said the outcome of the weekend's meeting with global leaders was "a modest favorable surprise for markets." But the issues of intellectual property were very unlikely to be resolved in the upcoming talks, he added.

Others were just as cautious. "We seem to have come to almost the least positive result to justify the positive emotions of financial markets," said Andrew Jackson, head of fixed income at Hermes Investment Management.

Japan's Nikkei 225 index rose 2.1%. Stocks in London were also higher, with the FTSE 100 rising by 1.1%.

It was not just the trade negotiations that took place in the meeting with the global leaders in Japan this weekend. Russia and Saudi Arabia considered a deal for oil production cuts and helped send Brent's raw futures up 2.8% Monday. The United States and Turkey also began to slip over their differences with regard to the latter move to buy a Russian missile defense: It helped the Turkish lira up 1.5% against the dollar.

The cabin, which tends to accumulate in stress times, retired. Gold fell 1.4%, the Japanese yen weakened slightly against the dollar and 10-year-old US Treasury fell in price. It raised the yield, which is reversed to the prices, to 2.017% from 1.998%.

The mood was not strictly bullish, as US dollars, which often weaken when investors become more positive on the world economy, were stronger against a number of currencies. The WSJ dollar index was 0.3% higher.

The yield of major European government bonds fluctuated slightly after heads of government failed to reach an agreement on top jobs in the EU, including new presidents of the European Commission and the European Central Bank. The 10-year-old German bottom was minus 0.334%, a fraction during Friday's proximity.

Investors are concerned about the potential for further decline in China.


Photo:

johannes eisele / Agence France-Presse / Getty Images

Write to Paul J. Davies at paul.davies@wsj.com, Shen Hong at hong.shen@wsj.com and Steven Russolillo at steven.russolillo@wsj.com

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