AFP, Reuters London
European and US stock markets rebounded yesterday, helped by reports that China would accept a partial trade deal with the US in key talks this week.
London’s FTSE 100 closed 0.3% up at 7,166.50 points, Paris’ CAC 40 ended 0.8% higher at 5,499.14 points and Frankfurt’s DAX 30 gained 1.0% at 12,094.26 points, while the EURO STOXX 50 added 0.8% at 3,459.50 points.
The dollar was mixed while the pound steadied after yet more Brexit-fuelled volatility.
Crude oil prices, which had rallied over 1%, trimmed gains after data showed US oil output at record levels and stocks rising.
China remains open to a limited trade deal as long as US President Donald Trump imposes no more tariffs, Bloomberg News and the Financial Times reported, citing people close to the upcoming talks.
In return, Beijing would offer non-core concessions such as purchases of US agricultural products, the reports added.
“This is likely contributing to the gains we’re seeing in Europe... but unless the US is also willing to accept a limited deal — and nothing currently suggests they are — it may not lead to anything,” noted Craig Erlam, senior market analyst at Oanda trading group.
“Traders are jumping at the prospect of good news at the moment but there’s been so many false dawns in these negotiations, this may just be the latest,” he told AFP.
With less than a week to go before the next round of punitive tariffs is due to hit, Beijing’s top trade envoy Liu He will today meet US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
“Liu He is coming with real offers, it’s not an empty visit,” the FT quoted a source as saying.
“The Chinese are ready to de-escalate,” the source, briefed on the talks, added.
Asian stock markets had mostly closed lower yesterday ahead of the reports of possible progress in the talks, which could extend into Friday and with Trump present.
Asia tracked losses in Wall Street and across Europe from Tuesday as investors fretted over signs the global economy is slowing.
The International Monetary Fund has forecast the weakest growth in a decade owing to the long-running tariff disputes.
With economic data increasingly weak, the fresh hopes sparked by the reports for Thursday’s talks provided some much-needed support.
“But overall stock markets are still stuck in a violent see-saw... as investors try to position themselves ahead of the (talks),” IG chief market analyst Chris Beauchamp said.
Meanwhile oil prices shot 1.6% higher in European afternoon trading as Turkey began an offensive against Kurdish militants in northern Syria.
They later fell back on data from the Energy Information Administration showed production hitting a new record high while stocks rose more than expected.
“It is a little worrying that inventories are rising despite lower prices, as it suggests that demand is weak,” said market analyst David Madden at CMC Markets UK.
Crude prices then later pushed higher once again.
In Europe, talks between the European Union and Britain over an agreement to cover London’s departure from the EU on October 31 appeared to be going nowhere.
British lawmakers have voted to force Prime Minister Boris Johnson to seek an extension to the departure date if he cannot agree a deal, but the prospect of further prolonged political uncertainty is worrying investors.
Sterling jumped after a British newspaper report said that the EU would make a major concession in the negotiations, but the gains were quickly unwound as EU sources denied it.
The pound was last down marginally on the day at $1.2214.
Many economists say markets have already priced in the failure to reach a deal.
“In the interminably tedious EU-UK divorce process, things are getting uninteresting. Tweets are being fired. Latin quotes are being sent out. Markets did not expect a deal to be done, and so should remain indifferent (unless it looks as if a no-deal exit will be introduced in defiance of legislation),” said UBS economist Paul Donovan.
Sweden’s crown weakened to another decade low against the euro.
Scandinavian currencies have been buffeted by concerns about a global trade slowdown, and the Norwegian crown this week hit a more than decade low.
In bond markets, US Treasury and eurozone government bond yields ticked higher as investors happy to take on some more risk sold out of safer assets.
Spot gold prices succumbed to selling pressure and were last down at $1,501.
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