Stocks Surge, Bonds Tumble on Trade Talks and Data: Markets Wrap

(Bloomberg) --

U.S. stocks surged and Treasuries tumbled after a raft of data bolstered confidence in the American economy and trade tensions eased. The dollar edged lower.

The S&P 500 jumped to a five-week high, led by Tech shares, after China and the U.S. agreed to trade talks early next month. Banks rallied as yields on two-year notes jumped as much as 14 basis points, which would have been the largest full-day increase in a decade, before inching back. Defensive sectors retreated as strong private payrolls data and a hot reading on the services sector tamped down recession angst.

The dollar pared early losses, but still headed for its third decline in a row. The pound padded Wednesday’s surge after the U.K. Parliament blocked a no-deal Brexit and an early election. West Texas crude fell to around $56 a barrel.

“Escalating U.S.-China trade tensions have been the biggest equity headwind for months, so a relief rally on news high-level trade talks are planned for early October is no surprise,” said Alec Young, managing director of global markets research at FTSE Russell. “The bottom line is that stocks need earnings growth to move forward, and you can’t get that without progress on U.S.-China trade.”

The glimmer of hope in the global trade war -- officials from the U.S. and China had been struggling to agree on new talks -- adds to a broad risk-on mood that took hold Wednesday, when British lawmakers moved to block an imminent no-deal Brexit and Hong Kong’s leader sought to quell unrest in Asia’s key financial hub. After the strong economic readings, focus is now likely to shift to remarks from Federal Reserve Chairman Jerome Powell and the latest U.S. jobs report, both due Friday.

Elsewhere, Florida orange groves seemingly escaped major damage from Hurricane Dorian, but concern is now turning to soy, corn and cotton fields as well as livestock in Georgia and the Carolinas as the storm churns northward.

Here are some key events coming up:

• Fed speakers this week include Fed chair Jerome Powell on Friday.
• The U.S. jobs report on Friday is projected to show the widely watched nonfarm payrolls rose by 160,000 in August, versus 164,000 the month prior. Estimates are for unemployment to be steady at 3.7% and the average hourly earnings rate of increase to slow to 3%.

These are the main moves in markets:

Stocks

• The S&P 500 Index increased 1.3% as of 4 p.m. New York time.
• The Stoxx Europe 600 Index rose 0.7%.
• The U.K.’s FTSE 100 Index declined 0.6%.
• The MSCI Asia Pacific Index jumped 1.1%.
• The MSCI Emerging Market Index gained 1.2%.

Currencies

• The Bloomberg Dollar Spot Index was little changed.
• The euro climbed 0.1% to $1.1041.
• The British pound gained 0.5% to $1.2318.
• The Japanese yen fell 0.5% to 106.89 per dollar.

Bonds

• The yield on 10-year Treasuries climbed 9 basis points to 1.56%.
• Germany’s 10-year yield rose nine basis points to -0.584%.
• Britain’s 10-year yield gained 11 basis points to 0.605%.

Commodities

• Gold dipped 2.2% to $1,526.40 an ounce.
• West Texas Intermediate was little changed at $56.26 a barrel.

--With assistance from Charlotte Ryan and Samuel Potter.

To contact the reporters on this story: Randall Jensen in New York at rjensen18@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

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

©2019 Bloomberg L.P.