* Europe, Nikkei, Shanghai at 2-month tops as new tariffs
avoided
* Treasury bonds off as market scales back bets on Fed
easing
* PMI factory surveys disappoint, from China to Japan to
euro zone
* Oil prices jump 2.8% as OPEC looks set to extend supply
cuts
* Chipmakers rally jump as Trump cools heat on Huawei
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Marc Jones and Wayne Cole
LONDON/SYDNEY, July 1 (Reuters) - Stocks rallied and bonds
retreated on Monday as the United States and China agreed to
restart trade talks, leading investors to pare wagers on
aggressive policy easing by the major central banks.
The dollar firmed on the safe-haven yen as Treasury yields
rose and futures reined in bets for a half-point rate cut from
the U.S. Federal Reserve this month.
"It (Trump-Xi G20 meeting) played as well as possible," said
SEB Investment Management's global head of asset allocation Hans
Peterson. "So It gives us time to digest and get a bit better
activity in the global economy."
The United States and China agreed on Saturday to resume
trade negotiations after President Donald Trump offered
concessions to his Chinese counterpart Xi Jinping when the two
met at the sidelines of the G20 summit in Japan.
These included no new tariffs and an easing of restrictions
on tech company Huawei HWT.UL in order to reduce tensions with
Beijing. China agreed to make unspecified new purchases of U.S.
farm products and return to the negotiating table. The initial reaction was one of relief that at least new
tariffs were avoided.
Europe's STOXX 600 and Japan's Nikkei .N225 climbed 1% and
2.1% respectively to hit two-month tops and MSCI's broadest
global index .MIWD00000PUS added 0.2% having only just missed
out on its best first half to a year. Chinese blue chips .CSI300 jumped 2.6% to their highest
since late April, Germany's export-heavy DAX .GDAXI sprang
1.5% to its highest since August, Wall Street futures were up
over 1% while the combination of the Huawei hiatus and M&A
activity hoisted Europe's the tech sector .SX8P to a one-year
high.
E-Mini futures for the S&P 500 ESc1 and Nasdaq NQc1 rose
1.1% and 1.7% each too whereas in the bond market Treasury
futures TYc1 slid 10 ticks as yields on 10-year notes
US10YT=RR edged up 4 basis points to 2.04%. GVD/EUR .N
Fed funds 0#FF: dropped over 5 ticks as the market scaled
back the probability of a half-point rate cut this month to
around 15%, from nearer 50% a week ago. FEDWATCH
"I think the Fed expectations in the market are very
aggressive. Possibly a bit too aggressive," SEB's Peterson
added.
DAMAGE DONE
Yet, no deadline was set for a trade deal and much damage
has already been done, with two surveys of Chinese manufacturing
showing activity contracting. The official Purchasing Managers' Index (PMI) held at 49.4
in June, just missing forecasts, while the Caixin/Markit PMI
dropped to 49.4, the worst reading since January.
Surveys from Japan and South Korea showed similar slowdowns
as did the 19-country euro zone's reading which contracted for
fifth month running and at a faster pace than previously
thought. "Euro zone manufacturing remained stuck firmly in a steep
downturn in June, continuing to contract at one of the steepest
rates seen for over six years," said Chris Williamson, chief
business economist at IHS Markit.
"The disappointing survey rounds off a second quarter in
which the average PMI reading was the lowest since the opening
months of 2013."
The reaction in currency markets was to strip some recent
gains from safe harbours like the yen and Swiss franc. The
dollar crept up 0.4% on the yen to 108.26 JPY= and 0.7% on the
franc to 0.9830 CHF= .
The dollar added 0.4% on a basket of currencies to 96.531
.DXY , while the euro eased to $1.1328 EUR= . The dollar went
the other way on the Chinese yuan, dipping 0.4% to 6.8403
CNY= .
The dollar's gains took some of the shine off gold, which
fell 1.5% to $1,388 per ounce XAU= .
Oil prices sprang higher on news OPEC and its allies look
set to extend supply cuts at least until the end of 2019 as Iraq
joined top producers Saudi Arabia and Russia in endorsing the
policy. O/R
Brent crude LCOc1 futures rose $1.85 or 2.8% to $66.40,
while U.S. crude CLc1 gained $1.84 or 2.75% to $59.90 a
barrel.
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Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
Global markets in H1 https://tmsnrt.rs/2FEK8yw
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