NEW YORK (Reuters) – World equity markets rose on Friday to end an otherwise slow week on benign U.S. inflation and after strong economic data from China helped feed into optimism around trade, while crude oil retreated on news of weaker U.S. factory activity.
FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., February 27, 2019. REUTERS/Brendan McDermid
Chinese A-shares got a lift after MSCI late Thursday quadrupled their weight in its global stock benchmarks, a move it said might draw more than $80 billion of fresh foreign inflows to the world’s second-biggest economy.
China’s CSI300 index rose 2.2 percent to lift the gauge of blue chips 6.5 percent for the week, its best weekly performance since November 2015.
The Federal Reserve’s pledge to be patient on hiking U.S. interest rates gained new support after a Commerce Department report showing tame inflation pressures and U.S. personal income falling for the first time in more than three years in January.
The Fed has removed the key obstacle for the economy, the raising of rates, and the inflation data will help keep the Fed anchored, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
The postponement of U.S. tariffs on Chinese imports moved the bilateral trade spat toward a preliminary conclusion that should be helpful for the business community, she added.
“All of this helps toward a positive underpinning in the market,” Krosby said.
Wall Street ended lower on Thursday after U.S. President Donald Trump fueled concerns over U.S.-China trade talks, warning that he could walk away from a deal with China if it were not good enough. [.N]
But White House economic adviser Larry Kudlow later called progress in the negotiations “fantastic” and said the countries were “heading towards a remarkable, historic deal.”
A slew of surveys highlighted how much manufacturers are suffering worldwide, particularly those exposed to China’s slowdown, and added weight to expectations that policy tightening from central banks is pretty much over.
A private survey showed China’s factory activity contracted for a third straight month in February but at a slower pace, helping lift global equities.
MSCI’s gauge of stocks across the globe gained 0.21 percent.
In Europe, the FTSEurofirst index rose 0.36 percent to close at 1,469.79.
On Wall Street, the Dow Jones Industrial Average rose 35.14 points, or 0.14 percent, to 25,951.14. The S&P 500 gained 6.48 points, or 0.23 percent, to 2,790.97 and the Nasdaq Composite added 18.50 points, or 0.25 percent, to 7,551.03.
Oil prices reversed course to fall 2 percent as bearish U.S. manufacturing data stoked concerns over global energy demand.
The ISM manufacturing activity index in February sank to the lowest since November 2016, and was below expectations.
U.S. West Texas Intermediate futures fell $1.11 to $56.11 a barrel. Global benchmark Brent crude futures for May fell $1.26 to $65.05 a barrel.
The dollar rose, hitting 10-week-highs against the yen, as risk appetite improved amid a more upbeat outlook on the euro and on the prospect of a U.S.-China trade deal.
“Risk-on sentiment amid a global stock rally worked in favor of the euro,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The dollar was up 0.5 percent at 111.93 yen after hitting a 10-week high.
The euro was little changed against the dollar at $1.1370.
U.S. Treasury yields were higher as investors sold off safe-haven assets on hopes for a trade deal with China and shrugged off economic data reports whose release was delayed by the government shutdown.
The yield on 10-year U.S. Treasury notes rose to 2.7422 percent, with their price falling 8/32.
Reporting by Herbert Lash, additional reporting by Caroline Valetkevitch and Gertrude Chavez in New York; Editing by James Dalgleish