Benign outlook for US-China trade talks lifts global share values

Recovery fuels investor optimism in what amounts to grim end of year for markets

Equities around the world rose on Monday as possible progress in resolving the trade dispute between the United States and China engendered some investor optimism in what has been a punishing end of year for markets.

The US benchmark S&P 500 stock index advanced in light volume after US president Donald Trump said he held a “very good call” with China’s president Xi Jinping on Saturday to discuss trade and claimed “big progress” was being made.

Chinese state media were more reserved, saying Mr Xi hoped the negotiating teams could meet each other halfway and reach an agreement that was mutually beneficial.

The rise in US equities mirrored that in Asian and European markets, which were also buoyed by trade optimism. MSCI’s broadest index of Asia-Pacific shares outside Japan ended up 0.6 per cent, and Europe’s STOXX 600 finished 0.5 per cent higher.

Despite today’s advance, equities were set to end the year largely in the red, victims of investor anxiety over trade tensions and slowing economic growth.

The S&P 500 is down more than 9 per cent in December, on track for its largest decline since the Great Depression. For the year, the index is down more than 6 per cent.

Asia-Pacific shares outside Japan ended down 16 per cent for the year, while the STOXX 600 was more than 13 per cent lower.

“We’re coming into 2019 with uncertainty and everyone is in wait and see mode,” said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago. “People are going to need to see proof before they dive in again.”

On Monday, the Dow Jones Industrial Average rose 189.09 points, or 0.82 per cent, to 23,251.49, the S&P 500 gained 13.82 points, or 0.56 per cent, to 2,499.56 and the Nasdaq Composite added 33.62 points, or 0.51 per cent, to 6,618.15.

No more hikes

Yields on US Treasuries fell on Monday, keeping with the trend over the past two months as investors moved to lower-risk investments.

Benchmark 10-year notes were last up 16/32 in price to yield 2.6824 per cent, compared with 2.738 per cent late on Friday.

The fall in Treasury yields reflects expectations of a slowdown, if not a pause altogether, in the Federal Reserve’s progression of interest-rate hikes.

The precipitous drop in yields has undermined the US dollar in recent weeks. The dollar index, which measures the greenback against a basket of six other currencies, was down 0.2 per cent and on track to end December with a loss. It is, however, still set for its highest percentage gain since 2015.

On Monday, the dollar fell to a six-month low against the yen.

The euro was up 0.08 per cent to $1.1445, on track to end the year down nearly 5 per cent against the dollar.

Oil is set to finish 2018 deep in negative territory, down more than 20 per cent, as oversupply concerns have weighed. Both Brent and US crude have fallen more than a third this quarter, the steepest decline since the fourth quarter of 2014.

On Monday, oil prices were higher in choppy trade. Brent crude futures were up 21 cents at $53.42 a barrel. US West Texas Intermediate crude futures were up 10 cents at $45.43 a barrel. – Reuters