By Herbert Lash
NEWYORK (Reuters) – The dollar gained and global equity markets rose on Friday on upbeat U.S. economic data while amicable messages from Chinese President Xi Jinping and U.S. President Donald Trump helped defuse tensions over the prolonged U.S.-Sino trade war.
Government bond yields mostly rose as U.S. manufacturing output accelerated in November to its fastest pace in seven months and a survey of purchasing managers showed services activity also picked up more than expected.
Equity markets warmed to China’s renewed offer to reach a trade agreement with the United States. Xi said China wants to work out an initial pact and avoid a trade war.
Trump reciprocated, saying a trade deal with China is “potentially very close” and also that he stands with both the people of Hong Kong and Xi amid massive protests in the former British colony.
MSCI’s gauge of stocks across the globe <.MIWD00000PUS> inched up 0.16%, with the pan-European STOXX 600 index <.STOXX> closing up 0.44%.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 109.33 points, or 0.39%, to 27,875.62. The S&P 500 <.SPX> gained 6.75 points, or 0.22%, to 3,110.29 and the Nasdaq Composite <.IXIC> added 13.67 points, or 0.16%, to 8,519.89.
A 6.14% slump in shares of Tesla Inc <TSLA.O> weighed on Nasdaq as its electric pickup truck design received an underwhelming response.
“What you’ve seen is a market, even when the trade news wasn’t that great, you’ve seen the equity market still remaining extraordinarily well-bid,” said Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York.
“People got way too pessimistic about growth. The outlook in my opinion over the next year is much better than it was,” LaVorgna said.
The dollar index <.DXY>, which compares the dollar against six major currencies, was up 0.27% at 98.256.
The euro fell 0.32% against the greenback after a survey showed euro zone business growth almost ground to a halt this month, with IHS Markit’s flash November composite Purchasing Managers’ Index sliding closer to the 50 mark separating growth from contraction.
IHS Markit’s final Purchasing Managers’ index readings also showed German business conditions waned further.
After the upbeat U.S. data, most U.S. Treasury yields edged higher. The benchmark 10-year U.S. Treasury note <US10YT=RR> was little changed with its yield at 1.7706%.
Treasury yields had tracked the decline in Europe amid weak numbers in the region and on nagging doubts about U.S.-China trade. <GVD/EUR>.
“There’s skepticism about what Trump says, especially with more U.S. tariffs set to kick in on Dec. 15,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
Tariffs can be delayed, Mendelsohn said, “but there’s so much pessimism coming out of China at this point in time, it’s very hard to tell what’s real and what’s really going on.”
Safe-haven German government bond yields had their biggest daily fall in over a week and were last down 3.6 basis points at -0.364% <DE10YT=RR>.
Oil prices pulled back from two-month highs as doubts over the trade talks overshadowed expectations of an extension to production cuts by the Organization of the Petroleum Exporting Countries.
Brent crude futures <LCOc1> settled down 58 cents to $63.39 a barrel and West Texas Intermediate (WTI) crude futures <CLc1> fell 81 cents to settle at $57.77.
U.S. gold futures <GCv1> settled unchanged at $1,463.60 per ounce.
(Reporting by Herbert Lash; Editing by David Gregorio)