U.S. stock rally gains steam on Huawei reprieve

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NEW YORK (May 21): U.S. stocks advanced on Tuesday as the trade-war driven back-and-forth that has dominated markets this month showed few signs of abating. Treasuries slipped while the dollar retreated from earlier gains.

The S&P 500 Index climbed after the U.S. decided to grant limited relief for consumers and carriers that do business with Huawei Technologies, a day after the White House’s moves against the Chinese telecom giant battered stocks. Semiconductors bounced back from yesterday’s 4% sell-off, heading for their first gain in four sessions.

Risk assets have been whipsawed in May, as the world’s largest economies ratchet up both rhetoric and action on trade, with the latest phase focused on Huawei and its suppliers and customers. For all the turmoil a gauge of global stocks remains within 5% of an all-time high, while the S&P 500 is about 3% from a record. Against that backdrop, investors will be closely watching U.S. data this week, as well as Federal Reserve policy-meeting minutes due on Wednesday.

“We’re less than 5% off the highs that we just hit a couple of weeks ago. So I think that the market is assuming that we’re going to get something done here,” Sarah Hunt, a portfolio manager at Alpine Woods in Purchase, New York, said on Bloomberg Television. “If you don’t, I think you have some real risk in the equity markets, but you also still have very low interest rates globally.”

In Europe, technology shares powered the Stoxx 600 Index higher. Chinese equities had the strongest gains in the Asian session, while their Japanese peers ended lower. An advance for Samsung Electronics Co. helped bolster Korean shares, on bets it may benefit from Huawei’s need to shift away from American suppliers.

Elsewhere, the pound gained on reports that U.K. Prime Minister Theresa May is prepared to offer parliament a vote on holding a second Brexit referendum. The euro also gained. Turkey’s lira stayed lower after the country’s central bank effectively lowered its main interest rate, undoing a limited tightening of policy.

Here are some notable events coming up:

The Fed minutes of its FOMC April 30-May 1 policy meeting will be released Wednesday. Counting of votes from the Indian general elections takes place Thursday, as Prime Minister Narendra Modi attempts to secure a second term. 

ECB President Mario Draghi speaks in Frankfurt on Wednesday. 

The European Parliament holds continent-wide elections May 23-26. On Thursday, the ECB publishes its account of the April monetary policy decision. 

Bank of England Governor Mark Carney’s planned appearance before Parliament Tuesday, has been postponed.

And these are the main moves in markets:

Stocks

The S&P 500 Index gained 0.1% as of 10:59 a.m. New York time. The Stoxx Europe 600 Index gained 0.5%. The U.K.’s FTSE 100 Index increased 0.3%. The MSCI Emerging Market Index advanced 0.4%.

Currencies

The Bloomberg Dollar Spot Index increased less than 0.05%. The euro advanced 0.2% to US$1.1183, the biggest gain in over a week. The British pound gained 0.5% to US$1.2794. The Japanese yen decreased 0.5% to 110.57 per dollar.

Bonds

The yield on 10-year Treasuries advanced two basis points to 2.44%, the highest in more than a week. Germany’s 10-year yield gained three basis points to -0.06%, the highest in over a week. Britain’s 10-year yield advanced four basis points to 1.097%.

Commodities

West Texas Intermediate crude climbed less than 0.05% to US$63.11 a barrel. Gold fell 0.3% to US$1,274.21 an ounce, the weakest in almost three weeks.