Stocks Rise, Bonds Slip on China-Trade Speculation: Markets Wrap

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Stocks advanced in Europe and Asia while U.S. index futures drifted after more signs emerged that China will move to lessen the trade war’s repercussions. European sovereign bonds fell and Treasuries edged lower.

The Stoxx Europe 600 Index climbed, driven in part by a continued rotation into cyclical sectors that have lagged behind this year, such as mining and banking shares. Contracts on the S&P 500 were little changed and those on the Dow Jones and Nasdaq edged higher. Equities in Japan and Hong Kong led gains in Asia after an influential newspaper editor said China will implement measures to ease the trade war’s impact on the world’s second-biggest economy. Japan’s currency dropped for a third straight session.

China separately released a list of items approved for tariff exemptions that did not include soybeans and pork, as some had expected. Chinese stocks edged down, though shares of brokerages climbed earlier after the country removed a foreign investment limit in its capital markets. The measures planned by Beijing will benefit some companies from China and the U.S., Global Times editor Hu Xijin said in Twitter post.

Prospects of further market-supportive measures from China lifted sentiment after some investors dialed back back expectations for aggressive monetary stimulus from the European Central Bank on Thursday and the Federal Reserve next week. This week’s sell-off in government and corporate bonds moderated on Wednesday, though Treasury 10-year yields reached a fresh one-month high, having rallied off a three-year low reached earlier this month.

“We are primed for a little bit of disappointment,” Jeff Boswell, a fund manager at Investec Asset Management, told Bloomberg TV in Singapore. “On the QE front, whilst we’ve been expectant of something — certainly on the corporate bond-buying side that the market’s been expecting — it is unlikely to come tomorrow.”

Elsewhere, South Korean infrastructure shares outperformed after the departure of President Donald Trump’s national security adviser, spurring speculation the U.S. may show conciliatory gestures toward China and North Korea.

Here are some key events coming up this week:

OPEC’s monthly oil market report, which includes demand forecasts and production estimates, is due Wednesday.The ECB policy meeting Thursday is widely expected to see a cut to interest rates and a review of all options, including QE. Policy makers will also publish forecasts for growth and inflation. ECB President Mario Draghi will hold a press conference.U.S. data for August is due on producer prices Wednesday, and CPI Thursday.

These are the main moves in markets:

Stocks

The Stoxx Europe 600 Index climbed 0.6% as of 9:25 a.m. London time.Futures on the S&P 500 Index were little changed.Japan’s Topix index gained 1.6%.The MSCI Asia Pacific Index increased 0.9%.

Currencies

The Bloomberg Dollar Spot Index increased 0.1%.The British pound was little changed at $1.2351.The euro dipped 0.1% to $1.1027.The Japanese yen declined 0.2% to 107.77 per dollar.

Bonds

The yield on 10-year Treasuries was unchanged at 1.73%.The yield on two-year Treasuries climbed less than one basis point to 1.68%.Germany’s 10-year yield increased one basis point to -0.54%.Australia’s 10-year yield gained six basis points to 1.144%.

Commodities

West Texas Intermediate crude increased 0.8% to $57.88 a barrel.Gold rose 0.3% to $1,490 an ounce.Iron ore gained 2.5% to $91.04 per metric ton.LME zinc climbed 0.7% to $2,354.50 per metric ton.

–With assistance from Adam Haigh.

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Robert Brand

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