Stocks turn higher on hopes for trade talks

BEIJING (AP) — Stock markets turned higher yesterday on hopes for more talks next month on the trade war between the United States (US) and China.

European indexes rose after Asian ones closed lower, with futures pointing to gains on Wall Street later in the day.

Trade negotiators are due to meet in September for new negotiations, though there has been no sign of progress in recent days since an escalation by both sides earlier this month. Investors worry the spiraling tariff war over trade and technology could tip the global economy into recession.

London’s FTSE 100 was up 1.1 per cent to 7,191 and Frankfurt’s DAX advanced by the same rate to 11,829. France’s CAC 40 gained 1.4 per cent to 5,443. Italy’s FTSE-MIB did best, gaining almost two per cent to 21,392.

European stocks appeared further boosted by a deal to create a new more centrist government in Italy that leaves out the right-wing populist Lega party.

People walk past an electronic stock board showing Japan’s Nikkei 225 index at a securities firm in Tokyo yesterday. PHOTO: AP

In Asia, the Shanghai Composite Index slipped 0.1 per cent to 2,890.92 and Tokyo’s Nikkei 225 declined 0.1 per cent to 20,460.93. Hong Kong’s Hang Seng was up 0.3 per cent at 25,703.50.

South Korea’s Kospi shed 0.4 per cent to 1,933.41 and Sydney’s S&P-ASX 200 was up 0.1 per cent at 6,507.40. New Zealand declined while Taiwan and Singapore gained.

Despite the rise in Wall Street futures, investors’ confidence appears fragile as they juggle multiple threats to growth. Beyond the trade war, the risk is growing of a no-deal Brexit – and the trouble it could create for companies in Europe.

In a sign of caution in the US, traders looking for safety snapped up US government bonds. Bond buying drove long-term bonds further below short-term ones on Wednesday. That inversion of the US yield curve is a rare phenomenon that has correctly predicted previous recessions.

The yield of the 10-year Treasury fell below that of the two-year Treasury for a second day. The 10-year yield slid to 1.47 per cent, down from 1.49 per cent late Tuesday. The two-year dropped to 1.50 per cent from 1.52 per cent.

When the US yield curve inverted earlier this month for the first time since 2007, it led to a sell-off. This week, investors’ reaction has been more muted.

US economic growth slowed to an annual rate of 2.1 per cent in the April-June quarter from 3.1 per cent in the first quarter.

While an inverted yield curve has preceded every US recession, it is not a signal that one is imminent. It has taken 14 to 34 months for past recessions to begin following a yield curve inversion.

ENERGY

Benchmark US crude gained 36 cents to USD56.14 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 85 cents on Wednesday to close at USD55.78. Brent crude, used to price international oils, rose two cents to USD59.95 per barrel in London. It rose 90 cents the previous session to USD59.93.

CURRENCY

The dollar rose to JPY106.26 from Wednesday’s JPY106.11. The euro declined to USD1.1071 from USD1.1078.