Stocks gain on trade hopes, risk-on sentiment lifts yields

NEW YORK (Reuters) – Stock markets around the world moved higher on Friday following signs of progress in U.S.-China trade talks, while improved risk sentiment helped lift benchmark U.S. yields as demand decreased for safe-haven bonds.

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., March 26, 2019. REUTERS/Lucas Jackson

MSCI’s gauge of stocks across the globe gained 0.44 percent and was on pace to rise more than 11 percent for the quarter.

The British pound fell after lawmakers rejected Prime Minister Theresa May’s Brexit deal for a third time, leaving Britain’s withdrawal from the European Union in turmoil.

U.S. officials held “constructive” talks in Beijing, Treasury Secretary Steven Mnuchin said, concluding the latest round of dialogue with China aimed at resolving the trade dispute between the world’s two largest economies.

U.S. data on Friday showed price pressures muted in January, with a measure of overall inflation posting its smallest annual increase in nearly 2-1/2 years.

The “benign” inflation data is positive for stocks because it sets the stage for keeping the Federal Reserve “on hold” when it comes to interest rate policy, said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

“The two big drivers of stock returns so far this year have been optimism regarding a U.S.-China trade agreement and that the Fed has become a lot more dovish,” Arone said. “The news this morning both supports those views.”

On Wall Street, the Dow Jones Industrial Average rose 119.22 points, or 0.46 percent, to 25,836.68, the S&P 500 gained 9.93 points, or 0.35 percent, to 2,825.37 and the Nasdaq Composite added 40.15 points, or 0.52 percent, to 7,709.31.

The pan-European STOXX 600 index rose 0.40 percent.

U.S. Treasury yields rose as risk sentiment improved, though prices briefly gave up some losses after data showed that U.S. consumer spending rebounded less than expected in January.

Benchmark 10-year notes last fell 7/32 in price to yield 2.4139 percent, from 2.389 percent late on Thursday.

Capital markets have closely followed moves in Treasuries since last week, when the 3-month U.S. yield exceeded the yield on the 10-year note, an inversion of the yield curve that is widely seen as an indicator of a recession.

The dollar index, which measures the greenback against a basket of currencies, rose 0.02 percent, with the euro up 0.01 percent to $1.1221.

The Turkish lira weakened again and the government promised reforms after a volatile week.

Oil prices rose amid OPEC-led supply cuts and U.S. sanctions against Iran and Venezuela, putting crude markets on track for their biggest quarterly rise since 2009.

U.S. crude rose 1.26 percent to $60.05 per barrel and Brent was last at $68.37, up 0.81 percent on the day.

Additional reporting by Karen Brettell in New York, Ritvik Carvalho and Dhara Ranasinghe in London; Editing by Larry King and Dan Grebler

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