Stocks Rally on U.S.-European Trade Agreement: Markets Wrap

(Bloomberg) -- U.S. equities jumped after Donald Trump reached an agreement with European Commission President Jean-Claude Juncker aimed at averting a trade war. Treasuries declined on the news, while automakers, battered by the threat of tariffs, pared losses.

The S&P 500 Index pushed higher for the third straight day, and the Dow Jones Industrial Average jumped after word of an agreement was first reported by Dow Jones shortly before U.S. markets closed. The two sides agreed to expand European imports of U.S. liquefied natural gas and soybeans and lower industrial tariffs on both sides, Trump later said in a joint statement with Juncker.

“Today’s agreement between President Trump and EC President Juncker serves as an example of how the trade negotiations can lead to a positive outcome,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance. “Although the market hates uncertainty, it’s important to realize that the removal of that uncertainty can allow the market to move higher.”

Trump’s meeting with Juncker came amid a raft of earnings from U.S. companies, some of which reflected the impact of recent trade threats from the White House. General Motors shares plunged after the carmaker cut its profit forecast on surging metals prices. Fiat Chrysler also cut its profit outlook.

Earlier, the Stoxx Europe 600 Index retreated. Asian equities advanced, although Shanghai stocks finished lower as positive sentiment spurred by Beijing’s willingness to support the Chinese economy showed signs of fading.

The yen edged up after the Bank of Japan refrained from scaling back its bond purchases at a regular operation Wednesday. Most European government bonds rose ahead of Thursday’s European Central Bank meeting. Turkey’s lira regained some of the previous session’s losses, sustained after the central bank unexpectedly kept rates unchanged. Gauges of emerging-market currencies and shares climbed. Texas crude ticked up on stockpile decreases, and gold gained.

Terminal users can follow our Markets Live blog here.

Here are some key events coming up this week:

• Earnings season continues with the following tech companies among those reporting: Amazon.com, Twitter, Advanced Micro Devices, Qualcomm and Intel. Others include Nissan and Shell.
• The European Central Bank’s policy decision is Thursday.
• U.S. gross domestic product probably increased by about 4.2 percent at an annualized rate in the second quarter, the most since 2014, economists forecast ahead of Friday’s data.

Terminal users can follow our Markets Live blog here.

These are the main moves in markets:

Stocks

• The S&P 500 Index gained 0.9 percent as of 4 p.m. New York time.
• The Stoxx Europe 600 Index fell 0.3 percent.
• The U.K.’s FTSE 100 Index declined 0.7 percent, its biggest decline in over a week.
• The MSCI Emerging Market Index gained 0.8 percent to the highest in more than a month.

Currencies

• The Bloomberg Dollar Spot Index sank 0.5 percent to the lowest in almost seven weeks.
• The euro advanced 0.4 percent to $1.173.
• The British pound climbed 0.3 percent to $1.3191.
• The Japanese yen increased 0.2 percent to 110.97 per dollar, the strongest in over two weeks.

Bonds

• The yield on 10-year Treasuries increased two basis points to 2.97 percent.
• Germany’s 10-year yield decreased less than one basis point to 0.40 percent.
• Britain’s 10-year yield fell less than one basis point to 1.274 percent.

Commodities

• The Bloomberg Commodity Index increased 1 percent to its highest in over two weeks.
• West Texas Intermediate crude rose 1.3 percent to $69.39 a barrel, the highest in more than a week.
• LME copper fell 0.1 percent to $6,290.00 a metric ton.
• Gold advanced 0.6 percent to $1,231.88 an ounce.

--With assistance from Hans Lee, Adam Haigh, Justina Lee and Eddie van der Walt.

To contact the reporters on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net;Olivia Schaber in New York at oschaber1@bloomberg.net

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

©2018 Bloomberg L.P.