Global stocks hit six-month high

London — World stocks rallied to six-month highs on Wednesday as investors cheered signs of progress in US-China trade talks and reassuring economic data, helping push Germany’s 10-year bond yield back up to 0%.

Oil neared the key $70 per barrel mark — a multi-month high — on supply concerns.

Sterling extended its gains after British Prime Minister Theresa May said late on Tuesday she would seek another Brexit delay to agree an EU divorce deal with the opposition Labour Party leader, raising hopes of a “softer” Brexit.

Signs of progress in US-China trade talks and decent factory activity data from China and the US in recent days has lifted investor sentiment and taken the edge off world recession fears.

Europe’s stock markets rose almost 0.8% to their highest since August, tracking strong overnight gains in Asia where MSCI’s broadest index of Asia-Pacific shares outside Japan climbed to a seven-month peak.

Hopes for a deal to end the trade war between the world’s two largest economies were fanned by fresh comments from White House economic adviser Larry Kudlow that Washington expects “to make more headway” in talks this week.

“We’re being told that we’re 90% of the way there which is obviously encouraging but the final 10% — which apparently includes the enforcement mechanism and the removal of tariffs — could take some time to iron out,” said Craig Erlam, senior market analyst at Oanda in London.

“Investors are happy to be patient here in the hope that the two sides get this right and put an end to a trade war that has clearly taken its toll on markets.”

Germany’s stock market rose 1% to its highest level since October, while in Paris, French stocks scaled a similar high. The stronger tone to the pound, however, weighed on London’s FTSE index, which was a touch lower.

Generally strong world stocks and hopes of a softer Brexit sparked a sell-off in safe-haven government bonds, pushing yields off recent lows.

US 10-year treasury yields rose almost four basis points to 2.52%.

Germany’s benchmark 10-year German Bund yield rose to 0.005%. A week ago it hit a two-and-a-half-year low at about -0.09% on concern about the weak economic growth backdrop.

“What we’re seeing is that markets have climbed a world of worry but there is progress on trade, a recession is unlikely, central banks have made nods to more dovish policy,” said Chris Bailey, European strategist at Raymond James. “If you put that into the mix I’m not surprised risk assets have moved up.”

Oil prices stood near multimonth highs amid concerns about supply. Brent crude rose to as high as $69.92 per barrel, its highest since November and near the psychologically important level of $70 per barrel.

It was last up 0.6% at $69.80. US West Texas Intermediate (WTI) crude rose 0.34% to $62.79 per barrel.

News that the US is considering more sanctions against Iran, the fourth-largest producer of oil cartel Opec, and the halting of production at a crude terminal in Venezuela threatened to squeeze supply and pushed oil prices up on Tuesday.

Brexit roller-coaster

Sterling rose further as traders welcomed news that Britain’s May would begin cross-party talks with the opposition Labour party as a signal that Britain will end up with a “softer” exit from the EU.

The pound strengthened 0.4% higher at $1.3196, its highest since March 28. The British currency had slipped below $1.30 on Friday on growing fears of a no-deal Brexit.

The dollar strengthened 0.2% against the yen to ¥111.54 and the euro added 0.1% to buy $1.12170.

The dollar index, which tracks the greenback against a basket of six major rivals, eased 0.19% to 97.176.

Cryptocurrency bitcoin, which surged 18.7% on Tuesday following a major order by an anonymous buyer, extended its gains by another 1.6% to $4,977.48.

Spot gold dipped 0.08% to trade at $1,291.31 per ounce.

Reuters