Thursday 18.00 BST
What you need to know
- S&P 500 rallies 0.7%; Turkish lira up another 4%
- China agrees to restart trade talks with US
- Dollar slips from 13-month high; Treasury yields rise
- Oil and copper prices gain ground
- Gold inches off 19-month low
Global risk appetite showed a solid improvement yesterday as hopes of an easing of US-China trade tension and a further recovery for the Turkish lira helped calm concerns over the outlook for emerging markets.
US and European stocks rallied and emerging market currencies gained ground as the dollar index retreated from a 13-month high, Treasury prices fell back and industrial commodities steadied.
The more positive mood came as Beijing confirmed it would restart stalled trade talks with Washington this month — although many in the markets remained sceptical.
“The two sides still look a long way from reaching a deal to avert further tariffs,” said Capital Economics.
“The talks will only be attended by low-level officials and, in any case, it is worth remembering that the last ‘deal’ agreed back in May lasted only a matter of weeks before new US tariffs were announced.”
Meanwhile, the Turkish lira extended its recovery from Monday’s record low against the dollar by a further 3 per cent, although shares in Istanbul shed 3.5 per cent and Turkish sovereign bond yields rose.
Per Hammarlund, chief EM strategist at SEB, warned the lira’s rebound was likely to be temporary as the basic reasons for its weakness were still in place.
“The lira sell-off will resume in the absence of a major shift in economic policymaking in Turkey. So far, the government has shown few signs of being willing to change course, either on economic policy or in its relations with the US.”
On Wall Street, the S&P 500 more than recouped the previous day’s fall — taking it back within 1 per cent of January’s record high — with Walmart shares rising sharply after the retailer reported strong sales growth.
There was relatively little impact from the day’s US economic reports. The Philadelphia Federal Reserve’s manufacturing index fell sharply in August while US housing starts staged only a tepid rebound last month
Most European equity indices also moved higher, but Italian stocks tumbled 1.8 per cent to the lowest level since April 2017 as Atlantia shares sank.
Brent oil rallied after ending at the lowest since April on Wednesday, while copper bounced off a 15-month low.
By midday in New York, the S&P 500 was up 1.1 per cent at 2,848 — just 25 points short of January’s record peak. The Nasdaq Composite was 1 per cent higher — putting it in sight of its own all-time peak — while the Dow Jones Industrial Average was up 1.6 per cent.
In Europe, the pan-regional Stoxx 600 rose 0.5 per cent, as the Xetra Dax in Frankfurt added 0.6 per cent and the FTSE 100 in London gained 0.8 per cent.
In Milan, Atlantia shares fell more than 22 per cent.
MSCI’s Emerging Market equity index inched up 0.1 per cent — a day after its 20 per cent decline from a cyclical high in January took it into bear market territory
China’s CSI 300 index fell 0.5 per cent while Hong Kong’s Hang Seng fell 0.8 per cent. Index heavyweight Tencent fell 3 per cent to its lowest level in almost a year after reporting a rare drop in net profit.
Forex and fixed income
The dollar index was down 0.1 per cent at 96.60 — off a low for the day of 96.32. On Wednesday, the gauge hit 96.98, the highest since June last year.
The euro was up 0.2 per cent at $1.1364 after it briefly regained the $1.14 mark early in the day.
Among EM currencies, the Mexican peso was up 0.4 per cent against the dollar while the Russian rouble was 0.6 per cent higher and Polish zloty was up 0.4 per cent.
The yield on the 10-year US Treasury was up 3 basis points at 2.88 per cent, while that on the two-year note was 2bp higher at 2.62 per cent. The US 2-10 yield gap hit its lowest level for more than a decade on Wednesday.
Copper on the LME ended 2.4 per cent higher at $5,939 a tonne after falling 4 per cent in the previous session and touching a 15-month low.
Brent oil was up 0.7 per cent at $71.27 a barrel while US West Texas Intermediate was 0.5 per cent higher at $65.33.
Gold was up $4 at $1,178 an ounce.
Additional reporting by Michael Hunter in London and Edward White in Taipei
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