World stocks rally to six-month highs on US-China trade optimism

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany - REUTERS

LONDON (Reuters): World stocks rallied to six-month highs yesterday 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 zero%.

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.

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 2-1/2 year low at around minus 0.09% on concern about the weak economic growth backdrop.

Oil prices stood near multi-month 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 the Organization of the Petroleum Exporting Countries (OPEC), and the halting of production at a crude terminal in Venezuela threatened to squeeze supply and pushed oil prices up on Tuesday.

Brexit rollercoaster

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 28 March. 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.