World stocks rose on Tuesday, supported by broad gains in Europe and rising oil prices, even though markets across Asia remained in the grip of trade turbulence.
A July 6 deadline is looming for Washington to impose tariffs on $34 billion worth of Chinese goods that Beijing has vowed to match with tariffs on U.S. products. President Donald Trump also threatened on Monday to “do something” if the United States was not better treated by the World Trade Organization.
Prospects of a full-blown trade war and relentless yuan weakening – it has fallen 5 percent in the past two weeks and is near 11-month lows – reportedly forced China into intervention via state-run banks.
“It is by far the biggest (yuan loss) I can remember. Prudence suggests it has to be matched across Southeast Asia because of the competitive implications,” said Bank of New York Mellon strategist Neil Mellor. “It generates a degree of instability in the market simply by virtue of its scale.” Among equity markets, Hong Kong dived as much as 3.3 percent to nine-month lows, hit also by U.S. curbs on China Mobile. Shanghai’s bourse hit a two-year trough but closed higher as the yuan recovered.
The mood was more cheerful in Europe where a pan-European equity index rose 1 percent, the euro firmed and bond yields climbed after German Chancellor Angela Merkel struck a migration deal with her Bavarian conservative coalition partners.
In the United States, the Dow Jones Industrial Average rose 88.76 points, or 0.37 percent, to 24,395.94, the S&P 500 gained 7.04 points, or 0.26 percent, to 2,733.75 and the Nasdaq Composite added 2.71 points, or 0.04 percent, to 7,570.40. “The big driver behind U.S. resilience is that tech has been strong,” said Rory McPherson, head of investment strategy at asset manager Psigma. “Expectations are pretty high for the earnings season, with talk of 20 percent earnings growth year-on-year.” U.S. markets are set to close early for the Fourth of July holiday.—Reuters