U.S. stocks jump after Trump sees China progress

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LONDON/NEW YORK (Jan 8): Stocks surged Tuesday after the Trump administration said there was progress coming out of its two-day mid-level trade talks with China. The dollar rose with Treasury yields, and crude climbed toward US$50 a barrel on expectations the market will be tightened by OPEC’s output cuts. .

All major U.S. equity benchmarks were higher. The S&P 500 and Nasdaq gauges were up 1%, while the Dow Jones Industrial Average leaped more than 250 points at the open. Transportation stocks and automakers paced gainers.

“Talks with China are going very well!” Trump tweeted on Tuesday as the sides wrapped up the meetings.

In Asia, the MSCI Asia Pacific Index closed slightly lower and the MSCI China Index dipped. Japanese shares and Hong Kong stocks rose, though equities slid in South Korea. Meanwhile, European shares shrugged off unexpectedly weak German industrial production numbers and worsening euro-area consumer confidence to climb on strength among retailers and carmakers. The euro remained lower after the data.

While the year is off to an optimistic start, risks remain. The outcome of U.S.-China trade relations sill hangs in the balance. Meanwhile, parts of the American government remain shut down as lawmakers have been unable to an reach agreement on a budget that President Donald Trump will sign. Trump will deliver a prime-time televised address on Tuesday on his demand for a border wall, which is at the heart of the dispute. And in Europe, machinations over Brexit continue.

“Investors are happy to go with the positive trend in the current environment but remain wary of sharp downside reactions given the moves we’ve seen over the last few weeks and months,” Nick Twidale, chief operating officer at Rakuten Securities Australia, wrote in a note. “Traders are still very much aware that the various geopolitical factors that have been so prevalent in influencing market moves over the last 12 months are still relevant.”

Here are some events investors may focus on this week:

North Korea’s Kim Jong Un is visiting China ahead of a potential summit with President Trump. Wednesday sees the release of minutes from the Fed’s Dec 18-19 policy meeting. Powell will speak to the Economic Club of Washington D.C. on Thursday. Britain’s Parliament resumes a debate on the Brexit withdrawal bill, with Prime Minister Theresa May seeking to avoid defeat in a vote set for the week of Jan 14.
These are the main moves in markets:

Stocks

The S&P 500 Index was up 1.1% as of 9:36 a.m. in New York, the highest in more than three weeks. The Stoxx Europe 600 Index advanced 1.5% to the highest in three weeks. The MSCI All-Country World Index climbed 0.9% to the highest in more than three weeks. The MSCI Emerging Market Index dipped 0.3%.

Currencies

The Bloomberg Dollar Spot Index gained 0.2%. The euro fell 0.4% to US$1.1432. The Japanese yen dropped 0.2% to 108.95 per dollar. The British pound declined 0.3% to US$1.2737. The MSCI Emerging Markets Currency Index fell 0.2%.

Bonds

The yield on 10-year Treasuries one basis point to 2.7084%. Germany’s 10-year yield advanced one basis point to 0.233%. Britain’s 10-year yield gained two basis points to 1.269%.

Commodities

The Bloomberg Commodity Index gained 0.7%, reaching the highest in almost three weeks on its fifth straight advance. West Texas Intermediate crude advanced 1.8% to US$49.40 a barrel, hitting the highest in three weeks with its seventh consecutive advance. Gold dipped 0.6% to US$1,282.06 an ounce.