Stocks Rise as Treasury Rally Eases; Pound Slumps: Markets Wrap

(Bloomberg) --

U.S. stocks advanced as the rally in Treasuries eased and investors looked to China for the latest developments in the standoff over trade. The dollar climbed.

The S&P 500 Index remained on track for its best quarter since 2009, with commodity and financial shares leading gains on Thursday. The gauge briefly fell after White House economic adviser Larry Kudlow said the Trump administration is prepared to keep negotiating with Beijing for weeks or even months. Treasury 10-year yields rebounded from a 15-month low, while the greenback extended its advance into a third day. The pound slid as the U.K. government will put to a vote the Brexit withdrawal agreement only on Friday.

The strong quarter for risk assets is coming to an end with a dose of caution after a Treasury surge raised concern of an economic slowdown. Federal Reserve Bank of New York President John Williams downplayed fears of recession risks being signaled by bond markets. Meantime, U.S. trade officials including Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer landed in Beijing for talks aimed at nailing down a deal with China.

“Risk assets are being supported right now, in my view, by a dovish Fed, a China stabilization and better sentiment around geopolitical risks,” said Frances Donald, the head of macroeconomic strategy at Manulife Asset Management. “That probably gives this rally a little bit more juice.”

The markets are betting on a deal with China in the not-too-distant future, and they’re pricing that in, according to Chad Morganlander, a money manager at Washington Crossing Advisors.

“Every day or every other day there is a headline or a rumor or a whisper about the China trade talks,” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. “The market seems to move very temporarily on a short-term basis based on those movements.”

Elsewhere, oil fell after President Donald Trump said that OPEC should lift crude production. Gold tumbled below $1,300 an ounce, while palladium had its biggest drop since 2010. The Turkish lira led declines among the world’s major currencies despite an organized effort to stem losses days before elections.

Here are some key events coming up:

• U.S.-China trade talks resume, with a cabinet-level American delegation due in China.
• Fed official Randal Quarles will speak Friday to the Shadow Open Market Committee on “Strategic Approaches to the Fed’s Balance Sheet and Communications.”

These are the main moves in markets:

Stocks

• The S&P 500 rose 0.4 percent to 2,815.44 at 4 p.m. in New York.
• The Stoxx Europe 600 Index dipped 0.1 percent.
• The MSCI Asia Pacific Index decreased 0.6 percent.
• The MSCI Emerging Market Index gained 0.2 percent.

Currencies

• The Bloomberg Dollar Spot Index advanced 0.4 percent.
• The euro declined 0.2 percent to $1.1222.
• The Japanese yen dipped 0.1 percent to 110.58 per dollar.
• The British pound slid 1 percent to $1.3055.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.38 percent.
• Germany’s 10-year yield advanced one basis point to -0.07 percent.
• Britain’s 10-year yield fell one basis point to 1 percent.

Commodities

• The Bloomberg Commodity Index declined 0.6 percent.
• West Texas Intermediate crude dipped 0.2 percent to $59.30 a barrel.
• Gold sank 1.6 percent to $1,295,30 an ounce.

--With assistance from Jan-Patrick Barnert, Adam Haigh, Andreea Papuc, Todd White, Yakob Peterseil and David Wilson.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net;Vildana Hajric in New York at vhajric1@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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