World stocks lift on US’s softer tone on China trade fight

New York — The US’s friendlier stance on its trade relationship with China led global stock markets slightly higher on Wednesday, despite a 2% slide in Chinese equities, and drew the dollar towards its second straight day of gains.

US President Donald Trump’s administration unveiled a plan for a stronger security review process of foreign investors acquiring American technologies, softening its tone from previous remarks indicating it would specifically block Chinese investments.

“Such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity,” Trump said in a statement.

By mid-morning, the Dow Jones Industrial Average rose 185.82 points, or 0.77%, to 24,468.93; the S&P 500 gained 13.14 points, or 0.48%, to 2,736.2; and the Nasdaq Composite added 12.14 points, or 0.16%, to 7,573.76.

Gains were capped by investors’ persistent concerns about the volatility in US-China trade rhetoric. “Investors are trying to decide what the policy is going to be with respect to trade with China and the rest of the world. It vacillates between their feeling pessimistic about it and some sense of encouragement that it won’t be as severe as feared,” said Rick Meckler, partner at Cherry Lane Investments, in New Jersey.

The pan-European FTSEurofirst 300 index rose 0.9% and MSCI’s gauge of stocks across the globe gained 0.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.24% lower, while Japan’s Nikkei lost 0.31%. Losses were led by China, where Shenzen-listed blue chips sank 2.1% to a whisker above 13-month lows.

Chinese equities have now fallen into so-called bear market territory, having tumbled 20% from recent peaks.

“After a lot of sabre-rattling, we are seeing Shanghai suffering a lot more than Wall Street, so clearly the first round [of the trade war] has been won by America. Unfortunately, that then overflows into emerging markets and Europe,” said Peter Lowman, chief investment officer at UK wealth manager Investment Quorum.

Political concerns in Europe are also worrying investors at the margin as a fight over migration policy in Germany’s coalition government rumbles on, raising concerns that the eurozone’s biggest economy could be headed for snap elections. This also contributed to pushing eurozone yields lower, with German yields edging toward one-month lows.

Trump’s latest plans to screen foreign investments led some safe-haven investments lower. The dollar, however, rose broadly, including against the Swiss franc and the yen, on the new US plan on foreign investments.

The dollar was up 0.28% against the yen at ¥110.36, and it advanced 0.47% against the franc. The dollar index, which measures the greenback against a basket of six currencies, was up 0.44% at 95.075, on pace for its second straight day of gains.

Gold prices slipped to a six-month low as the dollar strengthened, making bullion more expensive for buyers using other currencies. The move takes gold’s losses this month to more than 3% — the biggest monthly loss since September — driven by a dollar rally, a large decline in gold held by exchange traded funds, and a sharp fall in speculative bets on higher prices.

Spot gold dropped 0.3% to $1,255.27 an ounce. US gold futures fell 0.25% to $1,256.80 an ounce.

US treasuries gave back some price gains after Trump’s statement, but yields continued lower on the uncertainty.

In oil markets, prices rose on supply disruption in Canada, falling US crude stocks, uncertainty over Libyan exports, and US demands that importers stop buying Iranian crude from November.

Reuters

Source: businesslive.co.za