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GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars

Published 15/11/2019, 10:16
© Reuters.  GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars
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* European markets, MSCI world index battle to avoid weekly

* Kudlow says U.S., China getting close to trade deal

* Yen weakens, U.S. Treasury, European government yields

higher

* Hong Kong, Chile markets battered by protests

* World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Mixed week for commodities

By Marc Jones

LONDON, Nov 15 (Reuters) - Hopes of a trade deal between

Washington and Beijing turned world stock markets and other risk

assets higher on Friday, though an escalating wave of global

protests from Hong Kong to Chile left some deep scars.

Europe's main bourses followed Asia and Wall Street higher

.EU after White House economic advisor Larry Kudlow said on

Thursday that the U.S. and China were getting close to an

agreement and were talking every day. "We're getting close," he told an event at the Council on

Foreign Relations in Washington. "The mood music is pretty good,

and that has not always been so in these things."

It kept alive hopes that MSCI's 49-country world index

.MIWD00000PUS and Europe's STOXX 600 .STOXX could both avoid

their first weekly falls since the start of October, but others

had little chance.

Emerging market stocks .MSCIEF were down 1.7% for the

week, while the violent escalation of pro-democracy protests in

Hong Kong left the Hang Seng down 4.7% .HSI , its worst weekly

performance in four months.

Chinese blue-chip shares .CSI300 ended the day down 0.75%

and 2.4%, their biggest fall since August, while fierce

anti-government protests in Chile gave its currency its worst

week since 2011 with a 7% plunge CLPUSD=R .

Shane Oliver, chief economist at AMP Capital in Sydney,

likened regional markets' bullish reaction to positive trade

news to being in a relationship with an alcoholic, driven by

entrenched hopes for recovery.

"Markets want to believe that there will be some sort of

resolution to this issue, some sort of lasting truce at least,

even though the experience of the last 18 months doesn't give a

lot of cause for comfort," he said.

However, Oliver said weaker Chinese and U.S. economies as

well as the U.S. presidential election next year put pressure on

both sides to come to an agreement.

In currencies, the safe-haven yen JPY= weakened, with the

dollar rising 0.17% to buy 108.57 yen. The euro EUR= was

barely changed at $1.1023 and the dollar index, which tracks the

greenback against a basket of six major rivals .DXY was off

just 0.02% at 98.143.

Higher U.S. Treasury yields also illustrated the risk-on

tone in the Asian session, with the 10-year yield US10YT=RR

rising to 1.848% from a US close of 1.815% on Thursday.

The policy-sensitive two-year yield rose to 1.6101% from

1.593% on Thursday after U.S. Federal Reserve Chair Jerome

Powell said the risk of the U.S. economy facing a dramatic bust

is remote. A Reuters poll of more than 100 economists showed that while

concerns have eased over a U.S. recession, few see an economic

rebound, and most believe a trade truce is unlikely in the

coming year. VS CHINA

Government borrowing costs in Germany and France also inched

up on Friday, but were set for sizeable weekly declines, in

contrast to southern European countries that have come under

heavy selling pressure again this week.

Germany's 10-year Bund yield was at -0.33% DE10YT=RR off

more than one-week lows hit on Thursday. But it is down 8 bps on

the week, set for the biggest weekly fall since mid-August.

Dutch 10-year bond yields are down 7 bps this week, and French

yields are 5 bps lower NL10YT=RR , FR10YT=RR .

Data on Thursday had showed Germany's economy grew just 0.1%

in the third quarter, with consumer spending helping the country

to avoid a mild contraction and a technical recession of two

quarters of economic shrinkage.

"In general, there has been risk aversion in recent days and

a shift to core bond markets from the periphery," said Daniel

Lenz, a rates strategist at DZ Bank.

Global sentiment has been buffeted in recent weeks by

conflicting assessments of progress in talks between the United

States and China aimed at ending their 16-month-long trade war.

China's commerce ministry said the two countries are holding

"in-depth" discussions on a first phase trade agreement, and

that cancelling tariffs is an important condition to reaching a

deal. China has also ended a nearly five-year ban on imports of

U.S. poultry meat, which the U.S. Trade Representative said

would lead to more than $1 billion in annual shipments to China.

Those developments followed comments from officials from

both countries last week that they had a deal to roll back

tariffs, only to have U.S. President Donald Trump deny that any

such deal had been agreed to. The new record for the S&P, which gained just 0.08% to

3,096.63, came despite a grim outlook from network gear maker

Cisco Systems CSCO.O that underlined the impact of trade

uncertainty.

In commodity markets, U.S. crude prices rebounded after

sliding Thursday on rising U.S. crude inventories. U.S. West

Texas Intermediate crude CLc1 was 0.44% higher at $57.02 a

barrel.

Global benchmark Brent crude LCOc1 added 0.37% to $62.51

per barrel.

Gold retreated from gains that had been prompted by trade

uncertainty. Spot gold XAU= was last trading at $1,463.90 per

ounce, down 0.48%. GOL/

($1 = 6.9941 Chinese yuan)

Hang Seng set for worst week in nearly 4 months https://tmsnrt.rs/33QP7X1

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