By Chuck Mikolajczak
NEWYORK (Reuters) – A gauge of global stock markets rallied along with U.S. Treasury yields on Wednesday as optimism abounded for a trade thaw between the U.S. and China while sterling bounced on bets that UK Prime Minister Theresa May would keep her job.
U.S. Treasury yields advanced in tandem with Wall Street’s gains after U.S. President Donald Trump said trade talks with China were progressing with discussions under way by telephone and more meetings likely among officials of both countries.
In an interview with Reuters on Tuesday, Trump also said he would intervene in the Justice Department’s case against a top executive at China’s Huawei Technologies if it served national security interests or helped to close a trade deal.
China made its first major U.S. soybean purchases in more than six months on Wednesday, two U.S. traders said, and its first since Trump and his Chinese counterpart Xi Jinping struck a trade war truce in early December.
But after a spate of dizzying volatility in the past few days, there was some wariness about whether gains would hold.
“You had the tax stimulus was very big this year and next year there is still some stimulus to come,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.
“Then the headwind is tariffs … next year, depending on which scenario that plays out, we either have continued stimulus or it overwhelms that stimulus.”
The Dow Jones Industrial Average <.DJI> rose 265.64 points, or 1.09 percent, to 24,635.88, the S&P 500 <.SPX> gained 26.66 points, or 1.01 percent, to 2,663.44 and the Nasdaq Composite <.IXIC> added 98.96 points, or 1.41 percent, to 7,130.79.
The pan-European STOXX 600 index <.STOXX> rose 1.69 percent to give the index its best two-day performance in two-and-1/2 years and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 1.39 percent.
The British pound sterling jumped off 20-month lows as Prime Minister May vowed to fight a challenge to her leadership, saying a change could jeopardize Britain’s divorce from the European Union.
May has secured indications of support from nearly 200 of her lawmakers, which would be enough to ensure she wins a no confidence vote on Wednesday, based on statements made to the media and on social media.
The currency had tumbled on concerns about the vote of no confidence in the prime minister but traders bet she would survive after a number of colleagues backed her, isolating rivals who want a clean, sudden break from the EU.
Sterling <GBP=> was last trading at $1.2645, up 1.29 percent on the day.
The dollar index <.DXY> fell 0.37 percent, with the euro <EUR=> up 0.48 percent to $1.1368.
Investors were also digesting U.S. consumer price data that showed unchanged headline inflation, causing U.S. Treasuries to initially pare gains.
Benchmark 10-year notes <US10YT=RR> fell 8/32 in price to yield 2.9078 percent, from 2.881 percent late on Tuesday.
While markets still expect the Fed to tighten at its policy meeting next week, Trump said in a Reuters interview on Tuesday that the central bank would be “foolish” to do so.
U.S. crude <CLcv1> rose 1.24 percent to $52.29 per barrel as oil was supported by a drop in U.S. crude inventories, a cut in Libyan exports and an OPEC-led deal to trim output.
Graphic: Global assets in 2018 – http://tmsnrt.rs/2jvdmXlGraphic: Global currencies vs. dollar – http://tmsnrt.rs/2egbfVhGraphic: MSCI All Country World Index Market Cap – http://tmsnrt.rs/2EmTD6j
(Additional reporting by Sinéad Carew; Editing by Frances Kerry and Phil Berlowitz)