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US-China trade deal optimism lifts global market

US-China trade deal optimism lifts global market
President Donald Trump said on Tuesday he could let a March 1 deadline for a trade deal with China "slide" if the two sides were not close on an agreement.

Hopes for a resolution in a prolonged trade spat between the United States and China helped extend a week-long rally in world stock markets on Wednesday, while bond yields also climbed.

European shares rose 0.8 per cent, following broad gains in Asia. MSCI's gauge of stocks across the globe gained 0.44 per cent. Bond yields climbed as investors sold safe-haven government bonds in favour of riskier assets like equities. Benchmark 10-year U.S. notes last fell 7/32 in price to yield 2.7075 per cent, from 2.684 per cent late on Tuesday.

President Donald Trump said on Tuesday he could let a March 1 deadline for a trade deal with China "slide" if the two sides were not close on an agreement. But he added he was "not inclined" to delay raising tariffs. "There's still a level of uncertainty there but at least the rhetoric does not show he is digging his heels in, so the market has quite rightly taken it as a positive," said Justin Onuekwusi, a fund manager at Legal & General Investment Management.

The rise in U.S. benchmark Treasury yields came after data showed core consumer prices rose in January, easing concerns about a drop in inflation. The core Consumer Price Index, excluding food and energy components, gained 0.2 per cent, rising by the same margin for the fifth month. On Wall Street, the Dow Jones Industrial Average rose 133.4 points, or 0.52 per cent, to 25,559.16, the S&P 500 gained 10.98 points, or 0.40 per cent, to 2,755.71 and the Nasdaq Composite added 17.21 points, or 0.23 per cent, to 7,431.83.

U.S. inflation figures, which confirmed consumer prices were unchanged for a third straight month in January, also helped boost equity prices. "The Fed's new reaction function is they need to see inflationary pressures before they hike again, and clearly we've seen those inflationary pressures aren't there," said Mohammed Kazmi, portfolio manager at UBP in Geneva.

China's blue-chip CSI 300 rose around 2 per cent to a four-month high, with tech shares leading gains. Progress on another issue unnerving markets - a deal to fund the U.S. government and avoid another possible government shutdown - also provided a boost to risk appetite.

The Cboe Volatility Index, Wall Street's so-called "fear gauge," dropped overnight to 14.95, its lowest since October. Emerging market stocks faltered trading flat on the day. Bank of America Merrill Lynch on Tuesday said investors saw emerging markets as the "most crowded" trade for the first time ever. In commodities, oil prices surged nearly 2 per cent after OPEC said it slashed production in January and as U.S. sanctions hit Venezuela's oil exports.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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