Global stocks, oil prices lifted by increased trade talks optimism

Stocks around the world extended recent gains and oil prices jumped on Wednesday on optimism that the United States and China may be inching towards a trade deal, soothing fears of an all-out trade war and its possible impact on global growth. Optimism that the United States would reach a trade agreement with China boosted U.S. Treasury yields to their highest this year. Delegations from China and the U.S. ended talks in Beijing on Wednesday amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China's markets.

China has pledged to purchase "a substantial amount" of agricultural, energy and manufactured goods and services from the United States, the U.S. Trade Representative's office said on Wednesday. MSCI's all-country index climbed 0.68 per cent for the fourth day of gains. That added to advances since last week in equity markets around the world, following strong U.S. employment report and comments from the Federal Reserve chief that calmed worries that U.S. interest rate hikes would hurt growth.

On Wednesday, a clutch of U.S. Federal Reserve officials said they would be cautious about any further increases in interest rates so that the central bank could assess growing risks to an otherwise-solid U.S. economic outlook. Adding to the upbeat mood were reports that Beijing plans to introduce policies to boost domestic spending on items such as autos and home appliances this year. These come on the back of Friday's monetary easing by the People's Bank of China.

The U.S. stock market was supported by energy and technology sectors, and the benchmark S&P 500 index clung to gains that have lifted it by about 10 per cent from 20-month lows hit around Christmas. "There's a solid uptrend that's come off the Christmas Eve downturn. So any development that looks like it might be leading to an eventual resolution will be helpful to the markets," said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

The Dow Jones Industrial Average rose 57.06 points, or 0.24 per cent, to 23,844.51, the S&P 500 gained 1.15 points, or 0.04 per cent, to 2,575.56 and the Nasdaq Composite added 21.91 points, or 0.32 per cent, to 6,918.90. The pan-European STOXX 600 benchmark rose 0.46 per cent to a nearly four-week high, with trade deal hopes boosting the region's export-oriented autos and tech sectors. Optimism that the trade standoff would be resolved also lifted oil prices.

U.S. West Texas Intermediate (WTI) crude oil futures were at $50.8 per barrel, up $1.02, or 2.05 per cent, the first time this year that WTI has topped $50. International Brent crude futures were up $1.07, or 1.82 per cent, at $59.79 per barrel. The dollar sank to its lowest since October, with gains led by the euro and sterling, as risk appetite improved and investors reduced their safe-haven bets. "As long as you don't see a situation where there is a negative turn much like what we saw over the last quarter, markets will probably view any trade development, even if they're not concluded by the March 1 deadline, with modest optimism just because it reduces the downside risk to the outlook," said Mazen Issa, senior FX strategist, at TD Securities in New York.

Improved risk appetite sent U.S. Treasury yields to their highest this year, ahead of the sale of new 10-year supply by the Treasury Department. Benchmark 10-year notes were last down 5/32 in price to yield 2.7315 per cent after earlier rising to 2.747 per cent, the highest since Dec. 28. Gold prices rose on Wednesday, with spot gold rising 0.41 per cent to $1,290.1 per ounce. 

(With inputs from agencies.)