Stocks cheered by trade talk, sterling rises on May bets

Stock markets around the world rose along with U.S. Treasury yields on Wednesday as U.S. President Donald Trump sounded upbeat about a China trade deal and sterling bounced on bets that UK Prime Minister Theresa May would keep her job.

U.S. Treasury yields advanced in tandem with Wall Street's gains after Trump said trade talks with China are progressing with discussions underway by telephone and more meetings likely among officials of both countries.

In an interview with Reuters on Tuesday, Trump also said he would intervene in the Justice Department's case against a top executive at China's Huawei Technologies if it served national security interests or helped to close a trade deal.

But after a spate of dizzying volatility in the past few days, there was some wariness about whether gains would hold.

"There may be some near-term optimism because of the trade headlines but we'll see where it goes," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. "We have seen a lot of intraday movement lately and we might see the same today and that's a sign the market is looking at what the appropriate level should be."

The Dow Jones Industrial Average rose 348.46 points, or 1.43 per cent, to 24,718.7, the S&P 500 gained 39.98 points, or 1.52 per cent, to 2,676.76 and the Nasdaq Composite added 144.51 points, or 2.06 per cent, to 7,176.34.

The pan-European STOXX 600 index rose 1.88 per cent and MSCI's gauge of stocks across the globe gained 1.76 per cent.

The British pound sterling jumped off 20-month lows as May vowed to fight a challenge to her leadership saying a change could jeopardize Britain's divorce from the European Union.

The currency had tumbled on concerns about the vote of no confidence in the prime minister but traders bet she would survive after a number of colleagues backed her, isolating rivals who want a clean, sudden break from the EU.

Sterling was the last trading at $1.2651, up 1.34 per cent on the day.

The dollar index fell 0.4 per cent, with the euro up 0.42 per cent to $1.1362.

The euro was helped by a report Italy would scale down its budget deficit target to between 2.0-2.2 per cent of gross domestic product, below the previous target of 2.4 per cent.

U.S. INFLATION UNCHANGED

Investors were also digesting U.S consumer price data that showed unchanged headline inflation, causing U.S. Treasuries to initially pare gains.

But benchmark 10-year notes fell 5/32 in price to yield 2.8987 per cent, from 2.881 per cent late on Tuesday.

While markets still expect the Fed to tighten at its policy meeting next week, Trump said in a Reuters interview on Tuesday that the central bank would be "foolish" to do so.

U.S. crude rose 1.24 per cent to $52.29 per barrel as oil was supported by a drop in U.S. crude inventories, a cut in Libyan exports and an OPEC-led deal to trim output.

Spot gold added 0.3 per cent to $1,246.65 an ounce.

Japan's Nikkei had led Asia with a jump of 2.15 per cent, and while Shanghai rose 0.34 per cent.

(With inputs from agencies.)