Picture: FINANCIAL MAIL
Picture: FINANCIAL MAIL

New York — Stocks around the world extended recent gains and oil prices jumped on Wednesday on optimism that the US and China may be inching towards a trade deal, soothing fears of an all-out trade war and its possible impact on global growth.

Optimism that the US would reach a trade agreement with China boosted US Treasury yields to their highest in 2019.

Delegations from China and the US ended talks in Beijing on Wednesday amid signs of progress on issues including purchases of US farm and energy commodities and increased access to China’s markets.

China has pledged to purchase “a substantial amount” of agricultural, energy and manufactured goods and services from the US, the US Trade Representative’s office said on Wednesday.

MSCI’s all-country index climbed 0.68% for a fourth day of gains.

That added to advances since last week in equity markets around the world, following strong US employment report and comments from the Federal Reserve chief that calmed worries that US interest rate hikes would hurt growth.

Federal Reserve caution

On Wednesday, a clutch of US Federal Reserve officials said they would be cautious about any further increases in interest rates so that the central bank could assess growing risks to an otherwise-solid US economic outlook.

Adding to the upbeat mood were reports that Beijing plans to introduce policies to boost domestic spending on items such as  vehicles and home appliances in 2019. These come on the back of Friday’s monetary easing by the People’s Bank of China.

The US stock market was supported by energy and technology sectors, and the benchmark S&P 500 index clung to gains that have lifted it by about 10%  from 20-month lows hit around Christmas.

“There’s a solid uptrend that’s come off the Christmas Eve downturn. So any development that looks like it might be leading to an eventual resolution will be helpful to the markets,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The Dow Jones Industrial Average rose 57.06 points, or 0.24%,  to 23,844.51, the S&P 500 gained 1.15 points, or 0.04%,  to 2,575.56 and the Nasdaq Composite added 21.91 points, or 0.32%,  to 6,918.90.

The pan-European STOXX 600 benchmark rose 0.46% to a nearly four-week high, with trade deal hopes boosting the region’s export-oriented autos and tech sectors.

Optimism that the trade standoff would be resolved also lifted oil prices.

US West Texas Intermediate (WTI) crude oil futures were at $50.08 per barrel, up $1.02, or 2.05%,  the first time in 2019 that WTI has topped $50. International Brent crude futures were up $1.07, or 1.82%,  at $59.79 per barrel.

The dollar sank to its lowest level since October, with gains led by the euro and pound sterling, as risk appetite improved and investors reduced their safe-haven bets.

“As long as you don’t see a situation where there is a negative turn much like what we saw over the last quarter, markets will probably view any trade development, even if they’re not concluded by the March 1 deadline, with modest optimism just because it reduces the downside risk to the outlook,” said Mazen Issa, senior FX strategist, at TD Securities in New York.

Improved risk appetite sent US Treasury yields to their highest in 2019, ahead of the sale of new 10-year supply by the treasury department.

Benchmark 10-year notes were last down 5/32 in price to yield 2.7315% after earlier rising to 2.747%,  the highest since December 28.

Gold prices rose on Wednesday, with spot gold rising 0.41% to $1,290.1 per ounce.

Reuters