US and European stocks maintained their upward momentum as hopes for progress in resolving the trade dispute between Beijing and Washington were buoyed by news that negotiations between the two countries would be extended into an unscheduled third day.
President Donald Trump earlier said that the talks were “going very well”, following on from positive comments on Monday by Wilbur Ross, US commerce secretary and trade hawk.
“With the US and China working to resolve their issues, the Federal Reserve promising to remain flexible and the US economy firing on all cylinders, it is easy to see why sentiment is on the up,” said Fiona Cincotta, senior market analyst at City Index.
“Obviously, this is not the end of US-China trade tensions by a long shot and there will almost certainly be further bumps and twists along the way but, for now, the markets are happy with the slow, steady progress that it perceives has been achieved.”
Indeed, the S&P 500 was heading for its third straight day of gains and was up more than 9 per cent from the 20-month intraday low it struck on December 26.
Oil prices also continued to regain ground with Brent crude rising for a seventh day and appearing to make a decisive break above the $58 a mark.
The trade optimism continued to weigh on Treasury prices with the yield on the 10-year note continuing to climb off a one-year low hit at the end of last week.
German Bund yields also inched higher, in spite of further signs of weakness in the eurozone’s biggest economy.
Industrial production fell 1.9 per cent in November, echoing an unexpectedly steep drop in factory orders announced on Monday and heightening the view that the German economy, and that of the eurozone more generally, had shifted down a gear in the fourth quarter.
Yet there was only a muted impact from the data on the euro with the single currency holding at the upper end of its recent range against the dollar.
“The narrowing in the Treasury/Bund yield differential is doing stalwart work in defending the downside for euro/dollar now and my confidence we’ve seen the lows for this cycle is growing,” said Kit Juckes, analyst at Société Générale.
Equities
By midday in New York, the S&P 500 was up 0.5 per cent at 2,563 — having earlier risen to 2,579.82 — leaving it 9.2 per cent up from its Boxing day low. The index has now risen 4.7 per cent over the past three days.
The Dow Jones Industrial Average was 1 per cent higher while the tech-heavy Nasdaq Composite was up 0.7 per cent as participants largely managed to brush off a profit warning from South Korea’s Samsung.
Retailers led the way higher in Europe, helped by positive comment on the sector from BoA Merrill Lynch, which put a “buy” rating on France’s Carrefour. The stock rose more than 2.7 per cent, with CAC 40 index in Paris rising 1.2 per cent.
The pan-regional Stoxx Europe 600 index rose 0.9 per cent as the Xetra Dax in Frankfurt gained 0.5 per cent and London’s FTSE 100 ended 0.7 per cent higher.
Seoul’s Kospi Composite fell 0.6 per cent as index heavyweight Samsung fell almost 2 per cent.
In Tokyo, the Topix edged up 0.4 per cent, with shares in SoftBank up 5.7 per cent after it scaled back plans for investment in lossmaking shared-office provider WeWork.
Forex and fixed income
The euro was down just 0.2 per cent on the day against the dollar at $1.1451. The currency pair has held between $1.13 and $1.15 for most of the past two months.
The greenback was down 0.1 per cent versus the yen at ¥108.59, while sterling was down 0.4 per cent at $1.2722. The dollar index was up 0.2 per cent 95.84.
The yield on the 10-year German Bund ended the day at 0.23 per cent, up 1 basis point — its third rise in a row.
The US 10-year Treasury yield was up 3bp at 2.71 per cent, with the two-year yield up 6bp at 2.58 per cent
Commodities
Brent oil was up 1.9 per cent at $58.44 a barrel, a rise of 7.3 per cent from the low it struck two weeks ago. US West Texas Intermediate crude was 1.8 per cent higher at $49.41 a barrel.
Gold was down $3 at $1,285 an ounce.
