Dollar, global shares gain as trade worries linger
NEW YORK (Reuters) – The dollar gained and global equity markets rose on Friday on upbeat US economic data while amicable messages from Chinese President Xi Jinping and US President Donald Trump helped ease recent tensions over the prolonged US-Sino trade war.
Government bond yields rose as US manufacturing output accelerated in November to its fastest pace in seven months and a survey of purchasing managers showed services activity also picked up more than expected.
Equity markets warmed to China’s renewed offer to reach a trade agreement with the United States, with Xi saying China wants to work out an initial pact with the United States and has been trying to avoid a trade war.
Trump reciprocated, saying a trade deal with China is “potentially very close” and that he stands with both the people of Hong Kong and Xi amid massive protests in the former British colony.
MSCI’s gauge of stocks across the globe .MIWD00000PUS inched up 0.09%, with the pan-European STOXX 600 index closing up 0.44%.
On Wall Street, the Dow Jones Industrial Average rose 69.76 points, or 0.25%, to 27,836.05, the S&P 500 gained 2.79 points, or 0.09%, to 3,106.33 and the Nasdaq Composite dropped 1.24 points, or 0.01%, to 8,504.97.
The Nasdaq was weighed down by a 5.94% slump in shares of Tesla Inc as its electric pickup truck design received an underwhelming response.
“What you’ve seen is a market, even when the trade news wasn’t that great, you’ve seen the equity market still remaining extraordinarily well-bid,” said Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York.
“People got way too pessimistic about growth. The outlook in my opinion over the next year is much better than it was,” LaVorgna said.
The data was a sign of the continued resilience of the US economy in the face of the trade dispute and other headwinds.
The dollar index .DXY, which compares the dollar against six major currencies, was up 0.24% at 98.231. Helping the dollar’s strength was a survey showing euro zone business growth almost ground to a halt this month as activity in the bloc’s dominant services industry increased at a much weaker pace than expected.
IHS Markit’s flash November composite Purchasing Managers’ Index slid to 50.3 from October’s 50.6, moving closer to the 50 mark separating growth from contraction.
IHS Markit’s final Purchasing Managers’ index readings also showed German business conditions continued to wane in November, although at a reduced pace.
The common currency fell 0.25% against the greenback. Most US Treasury yields edged higher, boosted by the upbeat US data.
Treasury yields had tracked the decline in Europe amid weak numbers in the region. <GVD/EUR>. Yields also were pressured by persistent doubts about the US trade negotiations with China.
“There’s skepticism about what Trump says, especially with more US tariffs set to kick in on Dec. 15, said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
Tariffs can be delayed, Mendelsohn said, “but there’s so much pessimism coming out of China at this point in time, it’s very hard to tell what’s real and what’s really going on.”
Oil prices pulled back from two-month highs as doubts over the trade talks overshadowed expectations of an extension to production cuts by the Organization of the Petroleum Exporting Countries.
Brent crude futures LCOc1 eased 57 cents to $63.40 a barrel and West Texas Intermediate (WTI) crude futures CLc1 fell 78 cents to $57.80.