U.S. stocks followed worldwide equities to one-month highs and Treasury yields rose sharply on Thursday as renewed U.S.-China trade optimism and upbeat U.S. economic data stoked risk appetite and lured investors away from safe-haven assets.
The announcement that top negotiators from the United States and China will meet in early October in Washington raised hopes of a possible resolution to the two countries’ brutal trade war that has shaken markets and wreaked havoc on the global economy.
“At some point it behooves both countries to reach an understanding,” said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco. “The Chinese economy is slowing. They can play the long game but is that in their best interests?”
But Massocca noted that over the last 16 months, good news on the trade front can be undone by a tweet.
“Seems like it’s risk-on, risk-off depending on where trade is day-to-day,” Massocca said. “We’ve seen this movie before and when talks break down you see a flight back to quality and the market correct.”
U.S. private payrolls increased in August at their fastest pace in four months, according to ADP, blowing past analyst estimates ahead of Friday’s more comprehensive jobs report from the Labor Department.
A separate report showed the U.S. services industry rebounded last month to its fastest expansion since February, bouncing back from a three-year low, according to the Institute for Supply Management’s non-manufacturing purchasing managers index (PMI).
Market participants now look to Friday’s closely-watched jobs report and expected remarks from Federal Reserve chair Jerome Powell.
The Dow Jones Industrial Average rose 372.68 points, or 1.41%, to 26,728.15, the S&P 500 gained 38.19 points, or 1.30%, to 2,975.97 and the Nasdaq Composite added 139.95 points, or 1.75%, to 8,116.83.
Euro zone and emerging markets stocks charged higher on the renewed trade hopes.
The pan-European STOXX 600 index rose 0.72% and MSCI’s gauge of stocks across the globe gained 1.14%.
Emerging market stocks rose 1.21%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.13% higher, while Japan’s Nikkei rose 2.12%.
News of the impending U.S.-China talks sent U.S. Treasury yields higher on hopes a trade deal might remove an impediment to growth.
Benchmark 10-year notes last fell 31/32 in price to yield 1.5636%, from 1.459% late on Wednesday.
The 30-year bond last fell 74/32 in price to yield 2.0557%, from 1.957% late on Wednesday.
The yen slipped and the dollar edged lower against a basket of world currencies following the positive trade developments and upbeat U.S. jobs data.
The pound sterling, however, rose to its highest level against the greenback in over a month on hopes that a no-deal Brexit could be avoided.
The dollar index fell 0.05%, with the euro up 0.03% to $1.1036.
The Japanese yen weakened 0.56% versus the greenback at 107.01 per dollar, while Sterling was last trading at $1.2327, up 0.63% on the day.
Oil prices crept higher, lifted by the tide of trade optimism and a decrease in U.S. crude inventories.
U.S. crude oil futures edged up 0.07% to settle at $56.30 per barrel, while Brent crude oil futures settled at $60.95 per barrel, a 0.41% increase.
Gold prices dropped on the signs of a thaw in trade tensions and the upbeat U.S. data that sent investors to riskier assets.
Spot gold dropped 2.2% to $1,518.23 an ounce.
Copper rose 1.60% to $5,840.00 a ton.
Three-month aluminum on the London Metal Exchange rose 0.90% to $1,791.00 a ton.