Stocks Rally, Treasuries Tumble on Tariff Delay: Markets Wrap

(Bloomberg) --

U.S. stocks halted a two-day slide and Treasuries tumbled after the Trump administration de-escalated its trade war with China. Oil surged and gold fell.

The S&P 500 Index jumped as much as 2% after trade officials granted a grace period before tariffs take effect on a broad swath of consumer goods Americans shoppers covet at the holidays. Makers and sellers of consumer electronics, toys and apparel led the advance.

• Apple surged more than 4% to pace gains among hardware makers
• Best Buy rose the most in the S&P 500, while Target added 3%
• Gap and L Brands jumped more than 3%; Hasbro surged
• Soybeans rose 1.5%, oil added 3.8%
• Gold lost more than $50 an ounce from its high

The trade headlines sparked demand for risk assets that had been under pressure for more than a week as investors grew increasingly concerned the spat with China would slam global growth. President Donald Trump said he delayed the tariffs to spare the Christmas shopping season after his representatives had a “productive” call with China.

“This news creates a lot of this upside volatility,” said Bruce Bittles, chief investment strategist at Robert W. Baird. “If the news is sustainable and indeed they are moving to a trade agreement, this is a very important development and we can go to new highs.”

Before the trade headlines landed, fresh inflation data showed an unexpectedly hot reading, denting arguments for cutting interest rates and flattening the Treasury yield toward inversion. The spread between two- and 10-year yields hit the narrowest since 2007. The tariff detente did halt the bond rally, pushing the 10-year rate toward 1.7%.

Some investors also remained cautious about the prospects for a trade truce as signs of the war’s impact grow. Singapore’s government cut its forecast for economic growth this year to almost zero. In Europe, Henkel was among the worst-performing stocks after missing quarterly profit estimates, which the detergents maker blamed on the trade conflict and a competitive retail environment.

“It’s an encouraging first steps but it’s difficult to speculate how far it will go,” Peter Jankovskis, co-chief investment officer at Oakbrook Investments. “We’ve certainly gotten into these situations before where the market believed we were headed toward a deal and then it was derailed by comments from various officials.”

Meanwhile, the situations in Hong Kong and Argentina remained unstable. The South American nation’s peso tumbled anew amid rising concern the nation will default on its debt, while Hong Kong equities slumped after its airport canceled flights for a second day as protesters clashed with police.

Here are some key events coming up:

• Companies releasing results include China’s JD.com, Tencent and Alibaba; Cisco, Walmart and Nvidia of the U.S.; the U.K.’s Prudential; Australia’s Telstra; Europe’s Swisscom and brewer Carlsberg.
• Wednesday brings data on China retail sales, industrial production and the jobless rate.
• Thursday sees the release of U.S. jobless claims, industrial production and retail sales data.

These are the main moves in markets:

Stocks

• The S&P 500 Index rose 1.4% as of 4 p.m. New York time.
• The Dow Jones Industrial Average rose 1.2%.
• Nasdaq Composite Index gained 2%, while the Nasdaq 100 Index rose 2.2%.
• The Stoxx Europe 600 Index rose 0.5%.
• The MSCI Asia Pacific Index decreased 1.4%.
• The MSCI Emerging Market Index decreased 0.3%.

Currencies

• The Bloomberg Dollar Spot Index advanced 0.2%.
• The euro fell 0.4% at $1.1174.
• The British pound slipped 0.2% at $1.2057.
• The Japanese yen fell 1.3% to 106.678.
• The Argentine peso slumped 4.8% to 55.55 per dollar.

Bonds

• The yield on 10-year Treasuries rose four basis points to 1.68%.
• The two-year rate rose eight basis points to 1.66%.
• Germany’s 10-year yield fell two basis points to -0.609%.

Commodities

• Gold futures fell 0.1% to $1,515 an ounce.
• West Texas Intermediate crude rose 3.8% to $57.04 a barrel.

--With assistance from Katherine Greifeld, Andreea Papuc, Todd White and Olivia Rinaldi.

To contact the reporter on this story: Jeremy Herron in New York at jherron8@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Yakob Peterseil

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