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Global stocks rebound on trade talk hopes


Friday 07.25 GMT

What you need to know

  • China stocks gain as Beijing confirms trade talks with US
  • European bourses expected to rebound
  • Japan miss out, falling on their return from the newly year break
  • Yen pulls back after flash rally
  • Oil prices nudge higher

Hot topics

The prospect of trade talks between China and the US helped cheer the mood on global stock markets at the end of a fraught week for investors, although Tokyo indices fell on their return from the new year break.

European bourses rose by around 1 per cent apiece after broader gains in Shanghai and Hong Kong. Mainland China’s CSI 300 was up 2.4 per cent, while the Hang Seng added 1.8 per cent in Hong Kong.

News that the US and China would hold trade talks early next week helped reversed early losses that sent the CSI fall to a three-year low. The Caixin services purchasing managers’ index released on Friday rose to a six-month high in December, a rare bright spot among data showing a slowing Chinese economy.

Sentiment faced a test from US jobs data set to be released at 1.30pm London time and expected to show the creation of 177,000 jobs in December outside the agricultural sector. Later, a speech by Federal Reserve chairman Jay Powell in Atlanta could add to investors’ impressions on the pace of the US central bank’s monetary tightening in 2019, which has been sharply criticised by the White House.

“In particular, remarks by Fed chair Powell that nodded in the direction of the weak stock market as a significant factor for Fed consideration (it is after all a type of financial tightening) could be important,” said Robert Carnell, an ING economist.

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The wider week was characterised by concern at the dangers posed to the trade war to global economic growth, after a rare revenue warning from Apple citing weak China sales added to fears which followed economic data showing a contraction in the country’s manufacturing sector.

Those fears were then compounded by the latest report showing US manufacturing grew at its slowest pace in more than two years in December, as the US-China trade dispute was felt at home.

Equities

The Europe-wide Stoxx 600 rose 1.1 per cent, with Frankfurt’s Xetra Dax 30 up 1.3 per cent and London’s FTSE 100 adding 1 per cent.

Futures trade pointed to gains of 1.3 per cent for the Nasdaq 100 after its first fall in six sessions took it down 3 per cent overnight, after Apples warning hung over the tech-heavy index. The S&P 500 was expected to rise 1 per cent, having fallen 2.5 per cent lower on Thursday.

Japan’s stocks remained exposed to the concern about the global economy on their return. The Topix index fell as much as 3.2 per cent before easing to be down 1.9 per cent amid low post-holiday volumes.

Australia’s S&P/ASX 200 was down 0.5 per cent as the basic materials sector slipped 0.8 per cent and financials dipped 0.6 per cent. Gold miners were among the best performers on the index as the price of the metal hit a near seven-month high as investors sought havens.

Forex and fixed income

The Japanese yen gave up gains following a flash rally on Thursday that saw the currency jump by more than 3 per cent against the dollar to a nine-month high. The yen was 0.7 per cent weaker at ¥108.36 to the dollar on Friday.

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Ten-year US Treasuries rose almost 3bp to 2.58 per cent, after hitting the lowest since mid-January 2018 on Thursday.

The dollar index was 0.1 per cent stronger.

The pound was little moved at $1.2634 and the euro was also flat at $1.1395.

Commodities

Oil prices were higher with Brent crude up 1.1 per cent at $56.57 a barrel and West Texas Intermediate up 1.3 per cent at $47.22.

Gold was up 0.1 per cent at $1,294 an ounce, around its highest in seven months.

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