Stocks Rally on Trade as Dollar Rises to 2019 High: Markets Wrap

(Bloomberg) --

Stocks climbed after the Trump administration signaled progress on trade negotiations and speculation grew that major central banks will shore up their economies. The dollar rose to this year’s high.

The S&P 500 Index gained for a third day, led by chipmakers, as U.S. Commerce Secretary Wilbur Ross said the nation will delay restrictions imposed on some business operations of China’s Huawei Technologies Co. The Treasury market was unfazed by President Donald Trump’s call for the central bank to cut rates by “at least 100 basis points.” Bunds tumbled as Germany was said to be preparing fiscal stimulus measures. Oil rallied as a drone attack in Saudi Arabia highlighted simmering Middle East tension. Gold fell.

In corporate news, Walt Disney Co. erased gains and was little changed at the close after a MarketWatch report cited a whistleblower who said the company had materially overstated revenue for years. Baidu Inc. surged in after-hours trading after quarterly revenue beat analysts’ estimates.

The week started on a positive note as the news on Huawei was seen as encouraging for the long-awaited trade pact between the world’s two largest economies. Still, the company said the temporary relief doesn’t change the fact that it’s been treated “unjustly.” The announcement of a reprieve followed a tweet from Trump over the weekend indicating the U.S. was “doing very well with China, and talking,” but suggesting he wasn’t ready to sign a deal.

“It’s kind of like a drunken walk,” said Paul Nolte, a money manager at Kingsview Asset Management in Chicago. “There’s no rhyme or reason from day to day as to what’s happening with trade, and trade is really what’s driving the markets. And there’s no way to handicap it. There is no glide path, there is no, ‘Here’s what happening.’ It’s a random walk.”

Trump’s top economic adviser, Larry Kudlow, will speak with business leaders this week amid concerns about the rising odds for a recession, the trade war and whipsawing markets. Federal Reserve Bank of Boston President Eric Rosengren pushed back against further rate cuts, arguing he’s not convinced that slowing trade and global growth will significantly dent the economy. Investors awaited Fed Chairman Jerome Powell’s remarks about the challenges for monetary policy at the Jackson Hole symposium Friday.

Blue-chip U.S. companies are likely to see a surge in demand for their bonds as the rising amount of negative-yielding debt globally forces more overseas investors to seek higher returns in dollar assets, according to Bank of America Corp. “There is a wall of new money being forced into the global corporate bond market,” strategists led by Hans Mikkelsen wrote in an Aug. 16 note.

Here are some notable events coming up:

• Minutes of the Fed’s July meeting will provide details on the discussions leading to the first interest-rate cut in a decade when they are released on Wednesday.
• Thursday brings the Bank Indonesia rate decision and press conference with Governor Perry Warjiyo.
• Flash PMIs are due for the euro area on Thursday.
• Kansas City Federal Reserve Bank hosts its annual central banking symposium in Jackson Hole, Wyoming, starting Thursday. Fed Chairman Jerome Powell will give remarks on Friday.

Here are the main moves in markets:

Stocks

• The S&P 500 rose 1.2% to 2,923.65 at 4 p.m. in New York.
• The Stoxx Europe 600 Index increased 1.1%.
• The MSCI Asia Pacific Index climbed 0.9%.

Currencies

• The Bloomberg Dollar Spot Index gained 0.3%.
• The euro decreased 0.1% to $1.1078.
• The Japanese yen dipped 0.3% to 106.65 per dollar.

Bonds

• The yield on 10-year Treasuries rose five basis points to 1.60%.
• Germany’s 10-year yield jumped four basis points to -0.65%.
• Britain’s 10-year yield climbed less than one basis point to 0.47%.

Commodities

• West Texas Intermediate crude increased 2.4% to $56.21 a barrel.
• Gold for December delivery fell 0.8% to $1,511.60 an ounce; the spot price dropped below $1,500.

--With assistance from Adam Haigh, Todd White and Laura Curtis.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth

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