FILE PHOTO: A man is reflected on a stock quotation board outside a brokerage in Tokyo, Japan, August 5, 2019. REUTERS/Issei Kato
October 10, 2019
By Rodrigo Campos
NEW YORK (Reuters) – Stocks rose on Thursday after U.S. President Donald Trump said he would meet with China’s top trade negotiator on Friday, while oil rose as OPEC pledged a decision on supply at its December meeting.
A drop in the U.S. currency, also tied to trade talks, supported dollar-denominated commodity prices, while sterling jumped just under 2%, on track for its largest gain against the dollar in seven months, after the British and Irish prime ministers said they would continue discussions to try and agree on a Brexit deal.
Markets were expected to remain volatile, with the focus on the China-U.S. trade talks, as wild overnight gyrations indicated traders were ready to chase every headline.
The euro hit its highest since Sept. 20 versus the dollar as the greenback turned weaker across the board <.DXY>, partly due to a Bloomberg report about a U.S.-China currency pact to stop the yuan’s devaluation. China’s offshore yuan hit its strongest levels in more than two weeks.
The risk-on environment weighed on the greenback, and even harder on Japan’s yen.
“There is growing optimism that we could get some partial agreement on trade between the U.S. and China. I think both sides are needing to have a win,” said Edward Moya, senior market analyst at OANDA in New York.
“So there is less safe-haven demand for the dollar. If we get some type of trade deal or mini-agreement or mandate, you’re going to see that being supportive of European assets. We’re seeing the euro now back above $1.10, which has been the resistance,” he added.
The dollar index <.DXY> fell 0.42%, with the euro <EUR=> up 0.33% to $1.1005.
Sterling <GBP=> was last trading at $1.2434, up 1.88% on the day and the safe-haven yen suffered through a risk-on session, recently down 0.42% versus the greenback at 107.94 per dollar.
The Turkish lira, under pressure this week after Ankara began air attacks over northern Syria, gained 0.71% versus the U.S. dollar at 5.83. It is still on track for its largest weekly drop in eight.
TRADE THE TWEETS
Trump’s tweet announcing his Friday meeting with Liu “is giving market participants a reason to believe that perhaps a trade deal or at least a partial trade deal might be announced as early as tomorrow,” said Robert Pavlik chief investment strategist at SlateStone Wealth LLC in New York.
Separately, Chinese state news agency Xinhua reported Liu said Beijing was willing to reach an agreement with Washington to prevent any further escalation of the trade war.
The Dow Jones Industrial Average <.DJI> rose 123.64 points, or 0.47%, to 26,469.65, the S&P 500 <.SPX> gained 17.78 points, or 0.61%, to 2,937.18 and the Nasdaq Composite <.IXIC> added 38.91 points, or 0.49%, to 7,942.65.
Stock futures were down over 1% overnight on contradicting reports of the state of talks between China and the United States.
China is unlikely to be willing to make an easy compromise with a U.S. president who seems increasingly vulnerable to domestic political pressure as opposition Democrats seek to impeach him, analysts said.
The pan-European STOXX600 index <.STOXX> rose 0.65% and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 0.55%.
Emerging market stocks lost 0.09%. MSCI’s broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> closed 0.41% lower, while Japan’s Nikkei <.N225> rose 0.45%.
Treasury yields rose, also on hopes of a trade resolution between the United States and China. However, some investors highlighted the difficulty of using the rapidly shifting headlines on trade to direct investment strategy.
“A choppy overnight session driven by conflicting signals regarding trade negotiations highlights the difficulty in chasing every 5 basis point move in yields, in that the proximate justification can unwind just as quickly,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
Benchmark 10-year notes <US10YT=RR> last fell 20/32 in price to yield 1.6543%, from 1.587% late on Wednesday.
The 2-year note <US2YT=RR last fell 3/32 in price to yield 1.5222%, from 1.474% late on Wednesday.
Among the widely followed emerging markets, Turkey’s government bonds saw another day of falls as investors fretted about the negative international reaction to Ankara’s military operation in northeast Syria.
Focus was also on the mood in Ecuador, as another day of fierce protests against recent fuel subsidy cuts hammered its bonds on Wednesday.
Safe-haven gold fell; spot gold <XAU> dropped 0.7% to $1,494.99 an ounce.
Graphic: Global assets in 2019 – http://tmsnrt.rs/2jvdmXl
Graphic: Global currencies vs. dollar – http://tmsnrt.rs/2egbfVh
Graphic: Emerging markets in 2019 – http://tmsnrt.rs/2ihRugV
(Reporting by Rodrigo Campos; additional reporting by Marc Jones and Noah Browning in London, Shreyashi Sanyal in Bengaluru, and Gertrude Chavez-Dreyfuss and Kate Duguid in New York; Editing by Bernadette Baum)
