Stocks rise with eyes on trade talks; pound rallies

Stocks rose on Thursday after U.S. President Donald Trump said he would meet with China’s top trade negotiator on Friday, while the British pound rallied after the prime ministers of Britain and Ireland revived hopes of a possible Brexit deal.

Trade work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 9, 2019. REUTERS/Brendan McDermid

A drop in the U.S. currency, also tied to trade talks, supported dollar-denominated commodity prices, including oil, which rose after OPEC pledged to make a decision on supply in December.

Markets were expected to remain highly volatile as high-level U.S.-China trade negotiations were due to continue through Friday. Trump’s comments after the close on Wall Street, calling negotiations “very, very good,” sent S&P 500 futures higher.

The euro hit its highest since Sept. 20 versus the dollar as the greenback turned weaker across the board .DXY, partly due to a Bloomberg report about a U.S.-China currency pact to stop the yuan’s devaluation. China’s offshore yuan hit its strongest levels in more than two weeks.

Sterling jumped just shy of 2%, on track for its largest gain against the dollar in seven months, after Irish Prime Minister Leo Varadkar said a Brexit deal could be clinched by the end of October after what he called a very positive meeting with Boris Johnson.

The risk-on environment weighed on the greenback, and even harder on Japan’s yen.

“With a Brexit deal looking more likely and U.S.-China talks showing more progress, it’s just clear that the dollar is losing some safe-haven demand,” said Juan Perez, senior currency trader at Tempus Inc in Washington.

The dollar index .DXY fell 0.4%, with the euro EUR= unchanged at $1.1004.

Sterling GBP= settled at $1.2440, up 1.9% on the day. The safe-haven yen suffered through a risk-on session and dropped 0.46% to the greenback at 107.96 per dollar.

TRADE THE TWEETS

Trump’s tweet announcing his Friday meeting with Liu gave “market participants a reason to believe that perhaps a trade deal or at least a partial trade deal might be announced as early as tomorrow,” said Robert Pavlik chief investment strategist at SlateStone Wealth LLC in New York.

Separately, Chinese state news agency Xinhua reported Liu said Beijing was willing to reach an agreement with Washington to prevent any further escalation of the trade war.

The Dow Jones Industrial Average .DJI rose 150.66 points, or 0.57%, to 26,496.67, the S&P 500 .SPX gained 18.73 points, or 0.64%, to 2,938.13 and the Nasdaq Composite .IXIC added 47.04 points, or 0.6%, to 7,950.78.

The pan-European STOXX600 index rose 0.65% and MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.56%.

Emerging market stocks rose 0.35%. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS closed 0.17% higher, while Nikkei futures NKc1 rose 0.74%.

Treasury yields also rose on hopes of a trade resolution between the United States and China. However, some investors highlighted the difficulty of using the rapidly shifting headlines on trade to direct investment strategy.

“A choppy overnight session driven by conflicting signals regarding trade negotiations highlights the difficulty in chasing every 5 basis point move in yields, in that the proximate justification can unwind just as quickly,” said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.

Benchmark 10-year notes US10YT=RR last fell 24/32 in price to yield 1.6698%, from 1.587% late on Wednesday.

The two-year note <US2YT=RR last fell 5/32 in price to yield 1.5464%, from 1.474% late on Wednesday.

Safe-haven gold fell; spot gold XAU dropped 0.8% to $1,493.85 an ounce.

Copper CMCU3 posted its largest daily gain in a month, up 1.70% to $5,780.50 a tonne.