Europe: Shares rally, bond yields rise as China fuels trade deal hopes

[NEW YORK] US and European shares advanced on Thursday as China struck a hopeful tone on trade relations with the United States and as Italy appeared close to forming a new government and resolving its political crisis.

Wall Street stocks jumped more than 1 per cent after China's commerce ministry said Beijing and Washington were discussing the next round of face-to-face talks scheduled for September. The comments spurred hopes for progress in the talks and boosted the Chinese yuan, which snapped a 10-day losing streak.

Stocks have been whipsawed over the past few weeks as trade rhetoric between the United States and China has ranged from combative to conciliatory. On Friday, China unveiled retaliatory tariffs on US$75 billion of US goods, and US President Donald Trump said he would tack an additional 5 per cent duty onto US$550 billion of Chinese goods.

"If there's promise that they might be able to negotiate and that tariffs will not be implemented right away, that's good news," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

European shares ended more than 1 per cent higher after Italy's president asked former Prime Minister Giuseppe Conte to return to head up a new coalition of the anti-establishment 5-Star Movement and the opposition centre-left Democratic Party.

The coalition is a step toward resolving a three-week political crisis triggered after League leader Matteo Salvini pulled his hard-right party out of its governing alliance with 5-Star. Italian stocks rose nearly 2 per cent and the country's government bonds also rallied, with yields on 10-year bonds hitting a record low.

US Treasury yields, however, moved off recent lows as stocks rose. Data showing second-quarter US gross domestic product growth in line with consensus estimates and weak results at a US$32 billion auction of seven-year government notes also bolstered bond yields.

Among currencies, Argentina's peso rebounded after sinking more than 3 per cent earlier in the day on the country's plans to extend the maturities on some US$100 billion of its debt. The peso was last up 0.14 per cent at 57.86 per dollar.

On Wall Street, the Dow Jones Industrial Average rose 328.53 points, or 1.26 per cent, to 26,364.63, the S&P 500 gained 37.07 points, or 1.28 per cent, to 2,925.01 and the Nasdaq Composite added 116.32 points, or 1.48 per cent, to 7,973.21.

The pan-European STOXX 600 index rose 1.04 per cent and MSCI's gauge of stocks across the globe gained 0.93 per cent.

Benchmark 10-year Treasury notes last fell 15/32 in price to yield 1.5164 per cent, from 1.468 per cent late on Wednesday.

The dollar index, tracking it against six major currencies, rose 0.29 per cent, while the euro was down 0.21 per cent to US$1.1054.

The Japanese yen weakened 0.48 per cent versus the greenback at 106.64 per dollar. Sterling was last trading at US$1.2175, down 0.28 per cent on the day.

In offshore trading, the Chinese yuan was last 0.33 per cent higher at 7.1451 per dollar.

Among commodities, spot gold last fell 1.09 per cent to trade at US$1,522 per ounce. Silver also eased 1.04 per cent to US$18.14 an ounce after hitting its highest level in more than two years.

US crude extended its gains from Wednesday on data showing a sharp fall in US inventories, with the approach of Hurricane Dorian toward Florida also raising concerns that offshore producers may slow output if the storm passes into the Gulf of Mexico.

US crude settled 1.67 per cent higher at US$56.71 a barrel, while Brent settled at US$61.08 a barrel, up 0.98 per cent.

REUTERS