LONDON (Reuters) – World shares ticked up on Friday, buoyed by comments from U.S. President Donald Trump that talks aimed at dialing down the damaging trade war with China were “moving right along”.
FILE PHOTO: Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., December 5, 2019. REUTERS/Lucas Jackson
Trump’s relatively upbeat tone in comments on Thursday was enough to encourage riskier bets by investors, despite a lack of agreement over whether existing tariffs should be dropped as part of an initial deal to ease the long standoff.
European shares, including the broader Euro STOXX 600, gained 0.4% by late morning, with indexes in Frankfurt and Paris up by similar amounts. Banks, technology firms and retail companies led the gains.
Wall Street futures were set to open in positive territory, too, with gains projected between 0.3%-0.4%.
The cautiously buoyant mood mirrored an appetite for riskier bets in Asia, where MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.6%.
The MSCI world equity index, which tracks shares in 47 countries, added 0.2% to 555.07 points, not far off a record high of 550.63 hit last January but still on track for a weekly fall.
Investors were hoping the two sides can reach a compromise to at least avoid their worst fear: that the United States goes ahead with its final batch of tariffs on about $156 billion of Chinese exports, due to take effect on Dec. 15.
Trump’s remarks came after Chinese officials reiterated demands that some U.S. tariffs be rolled back if the sides are to reach a so-called phase one deal.
Markets had expected the sides to seal the initial deal in November. Instead, investors are nervously watching the approaching deadline for the new U.S. levies.
“The difficulty with this is it’s very difficult to time and to trade,” said Jeremy Gatto, a multi-asset investment manager at Unigestion. “We are relatively favorable towards riskier assets in general – but with hedges.”
Gatto said those hedges include currencies such as the U.S. dollar, Japanese yen and Australian dollar, as well as options.
Investors have already taken precautions against a possible slide in stocks by buying put options, with demand for put options to hedge exposure to the S&P500 index climbing in recent days.
In one sign of detente, China said it would waive import tariffs imposed last year on some U.S. soybean and pork shipments. Beijing is rushing to source more meat to fill a gap in protein supplies.
China stocks posted their biggest weekly advance in nearly two months, with the blue-chips up 0.6%.
Investors were looking out for U.S. jobs data, due out at 1330 GMT. The non-farm payrolls report is expected to show 180,000 new jobs were created in November, up from 128,000 a month earlier.
Signs of buoyancy in the labor market would soothe anxiety over the impact of the trade war.
“Markets are in consolidation phase,” said Salman Ahmed, chief investment strategist at Lombard Odier. “It’s wait and watch for first, how does the non-farm payrolls look and, more importantly, the Dec. 15 tariff deadline.”
In other economic data, German industrial output fell unexpectedly in October, pointing to persistent weakness in the backbone of the economy. Berlin said, however, that new orders and business expectations suggest output may stabilize.
While markets have largely priced in the view that the world economy has dodged the bullet of recession, there are still signs of fragility in many major economies.
Oil prices steadied and were set for weekly gains ahead of a meeting of OPEC and its allies later in the day, where the grouping is expected to formally agree to more output cuts in early 2020.
Sources told Reuters that OPEC+ agreed to a 500,000 barrel per day cut, with the group due to next meet in March.
Brent crude futures were down 0.3%, or 18 cents, at $63.21 a barrel, a retreat from earlier gains.
The agreement coincided with the initial public offering of state oil firm Saudi Aramco, which was priced at the top of its range and raised $25.6 billion in the world’s biggest IPO.
In currencies, the British pound lost 0.3% but was still set for its best week since October. It has gained 1.5% against the dollar this week.
Sterling had spiked to a seven-month high of $1.3166 on Thursday on bets that next week’s election will give the Conservative party the majority it needs to deliver Brexit, ending near-term uncertainty.
The pound last stood at $1.328. It hit 2-1/2-year highs versus the euro.
Against a basket of currencies the dollar has dropped every day this week, falling to a one-month low of 97.356 on Thursday. The index was up a smidgeon at 97.460, and has lost nearly 1% this week.
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Reporting by Tom Wilson; Additional reporting by Sujata Rao in London; Editing by Hugh Lawson and Giles Elgood