Trade Truce Prompts Relief Rally for Stocks and Oil -- update

Date : 07/01/2019 @ 9:15PM
Source : Dow Jones News
Stock : Stmicroelectronics (STM)
Quote : 24.57  0.38 (1.57%) @ 12:35AM
Stmicroelectronics share price Chart

Trade Truce Prompts Relief Rally for Stocks and Oil -- update

Stmicroelectronics (BIT:STM)
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6 Months : From Jun 2019 to Dec 2019

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By Paul J. Davies 

U.S. chip makers looked set to be the big winners in Monday trading after a thaw in trade relations between the U.S. and China over the weekend.

The agreement between Beijing and Washington to get talks back on track and the concessions given to U.S. companies that trade with Chinese telecommunications firm Huawei Technologies lifted investor confidence and boosted Asian and Europe stocks earlier in the day.

Skyworks Solutions Inc., a 5G specialist, was the biggest riser in premarket action, up 6.6%, while Qualcomm Inc. and Broadcom Inc. also did well, rising 5.8% and 4.9% respectively.

That helped U.S. futures broadly, with the S&P 500 and the Dow Jones Industrial Average up by more than 1.1% and 1%, respectively. Changes in equity futures don't necessarily predict moves after the opening bell.

Technology stocks drove the rise in European markets, with STMicroelectronics NV up 5.6%. That helped lift the Stoxx Europe 600 by 1%, while Germany's DAX index was up 1.3%.

Traders and analysts called the moves a relief rally, and cautioned that frictions around commerce between the world's two largest economies were likely to be long-lasting. A better economic outlook with less trade-driven uncertainty could also mean hoped-for interest-rate cuts won't be realized.

"We appear to have arrived at almost exactly the minimum positive outcome to justify financial markets' positive sentiment," said Andrew Jackson, head of fixed income at Hermes Investment Management.

It wasn't just the trade talks that advanced in the meeting of global leaders in Japan this weekend. Russia and Saudi Arabia brokered a deal on cuts to oil production, helping to send Brent crude futures up 1.8% Monday. Confirmation of an oil deal was expected after a meeting of members of the Organization of the Petroleum Exporting Countries later Monday or Tuesday.

The U.S. and Turkey also began to smooth over their differences at the weekend regarding the latter's move to purchase a Russian missile defense system. That helped the Turkish lira rise 2.2% against the dollar.

Haven assets, which tend to rally in times of stress, retreated. Gold fell 1.3%, the Japanese yen weakened slightly against the dollar and 10-year U.S. Treasurys fell in price. That lifted yields, which move inversely to prices, to 2.023% from 1.998%.

The mood wasn't strictly bullish however, as the U.S. dollar, which often weakens when investors get more positive on the global economy, was stronger against a host of currencies. The WSJ dollar index was 0.2% higher.

Yields on major European sovereign bonds slipped slightly after government heads failed to reach an agreement on top jobs in the European Union, including new presidents for the European Commission and the European Central Bank. The 10-year German bund was at minus 0.328%, a fraction below Friday's close.

In China, the benchmark Shanghai Composite Index gained 2.2% on the diminished tensions between the U.S. and China, despite a set of disappointing readings for Chinese economic activity. Weekend data showed factory activity in China contracted for the second straight month in June. Japan's Nikkei 225 Index rose 2.1%.

Shen Hong, Steven Russolillo and Joe Wallace in London contributed to this article.

Write to Paul J. Davies at paul.davies@wsj.com

 

(END) Dow Jones Newswires

July 01, 2019 09:00 ET (13:00 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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