Global equity markets rebound on hopes US and China will resume talks

New York — Global equity markets rebounded on Tuesday on a report that the US and China hoped to resume talks to defuse a budding trade war, while the dollar jumped against the yen after the Bank of Japan (BOJ) said it intends to keep interest rates low.

BOJ reassurances that it will maintain its super-easy monetary policies for an “extended period of time” pushed the yen down and global bond yields lower. The dollar firmed 0.75% against the yen, putting it on pace for its best day in nearly three weeks, after BOJ said it would keep rates “very low” in comments that brought some relief to a market that had braced for bigger changes.

While the benchmark 10-year Japanese government bond dropped five basis points after the announcement, investors await meetings by the US Federal Reserve on Tuesday and Wednesday, and the Bank of England on Thursday.

“We still have a decent amount of news ahead of us,” said George Gonçalves, head of US rates strategy at Nomura Securities International.

Stocks rebounded, with regional indices for Britain’s FTSE 100, Germany’s DAX 30 and France’s CAC 40 all climbing. The pan-European FTSEurofirst 300 index of leading regional shares closed up 0.38% while MSCI’s gauge of stocks across the globe gained 0.29%.

The Dow Jones Industrial Average rose 144.27 points, or 0.57%, to 25,451.1. The S&P 500 gained 17.11 points, or 0.61%, to 2,819.71; and the Nasdaq Composite added 59.59 points, or 0.78%, to 7,689.60.

The market has withstood the recent technology sell-off and fears of a full-blown trade war remarkably well, said Hank Smith, co-chief investment officer at Haverford Trust in Pennsylvania. US President Donald Trump pays attention to the stock market and if there were a significant sell-off on trade tariff headlines, Smith said he believes Trump would reverse positions.

“The economy has momentum to withstand these tit-for-tat trade spats that are going on right now. The market is, at least for now, seeing this as negotiations as opposed to the beginning of an all out-out global trade war,” Smith said.

Oil prices fell and were poised for their largest monthly decline in two years as the market focused on US-Iranian tensions and priced in news of output by oil cartel Opec reaching a 2018 high in July.

October Brent crude futures fell 71c to $74.84 a barrel. The September contract, which expires later on Tuesday, traded at $74.36. US crude futures fell $1.13 to $69.00. Brent has lost about 6% this month, in its largest one-month slide since July 2016.

A rally in eurozone government bonds faded after preliminary data showed inflation in the bloc was higher than expected in July. Germany’s 10-year bond yield was slightly lower at 0.439%. Benchmark US 10-year treasury notes rose 5/32 in price to yield 2.958%.

Reuters