U.S. Stocks Rally as Trade Mood Turns Hopeful: Markets Wrap

(Bloomberg) -- Stocks rallied after optimistic remarks from French and U.S. leaders about developments in the Sino-American trade war. The dollar strengthened while 10-year Treasury yields were little changed.

All three main U.S. equity indexes recovered some ground following Friday’s swoon after President Donald Trump said prospects for a trade deal were better now than at any time since talks began last year. France’s Emmanuel Macron said things were moving forward between the U.S. and China. The S&P 500 Index closed near session highs in broad-based rally led by tech companies, but volume was thin -- almost 20% below average.

Addressing reporters at the end of the Group of 7 meetings in France, Trump said the Chinese “want to make a deal very badly.” The American president also said he’s not looking into auto tariffs for Japan right now.

The trade war’s latest twists and turns punctuated an already tumultuous August, with markets buffeted by signs of slowing global economic growth and violent protests in Hong Kong. Regardless of Monday’s developments, the risk of recession may have crept higher as protectionism escalated Friday, when Trump announced fresh levies on Chinese imports and called for American companies to pull out of Asia’s largest economy after China said it would impose retaliatory tariffs on U.S. goods.

“In the short term, it’s definitely difficult to navigate the trading environment,” Candice Bangsund, portfolio manager of global asset allocation at Fiera Capital, said in an interview at Bloomberg’s New York headquarters. “It’s a case of near-term fear, elevated volatility, very fragile investor sentiment. Investors are watching the headlines and trading on the headlines and that’s obviously created even more volatility in the marketplace.”

The Euro Stoxx 50 Index gained after Trump’s China comments. The euro slipped as German business confidence fell to the lowest in almost seven years. Asia stocks fell broadly, led by Hong Kong, in trading that had mostly closed before Trump’s remarks. The onshore yuan weakened for an eighth straight session. Britain’s markets were closed for a holiday.

Elsewhere, oil gave up earlier gains as traders digested the latest news on tariffs. The yen gave back some of its 1% increase from the previous session.

Here are the main moves in markets:

Stocks

• The S&P 500 Index increased 1.1% as of 4 p.m. New York time.
• The Dow Jones Industrial Average rose 1.1%
• Europe’s Stoxx 50 Index gained 0.4%.
• Germany’s DAX Index increased 0.4%.
• The MSCI emerging Market Index sank 1.3% to near an eight-month low.

Currencies

• The Bloomberg Dollar Spot Index rose 0.3%, the biggest gain in a week.
• The euro declined 0.4% to $1.1095.
• The Japanese yen weakened 0.7% to 106.16 per dollar, the biggest drop in almost two weeks.

Bonds

• The yield on 10-year Treasuries climbed less than one basis point to 1.54%.
• The yield on two-year Treasuries rose one basis point to 1.54%.
• Germany’s 10-year yield climbed one basis point to -0.67%.

Commodities

• Gold climbed 0.1% to $1,528.96 an ounce.
• West Texas Intermediate crude fell 0.6% to $53.82 a barrel, a two-week low.

--With assistance from Andreea Papuc, Adam Haigh and Todd White.

To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net

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

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