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World stocks edge off highs to await U.S.-China progress

Stock Markets Nov 26, 2019 06:55AM ET
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By Dhara Ranasinghe

LONDON (Reuters) - World stocks edged off their highest in almost two years on Tuesday, but kept record levels in sight, following fresh signs that the United States and China were working to end a trade war dragging on the global economy.

China's Vice Premier Liu He, U.S. Trade representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin held a phone call on issues related to a phase one trade agreement on Tuesday, China said.

This, alongside a strong Hong Kong debut for Chinese e-commerce giant Alibaba in the world's largest share sale this year, boosted markets in Asia (MIAPJ0000PUS) (N225) (AXJO).

MSCI's 49-country main world share index (MIWD00000PUS), touched its highest level in almost two years, before drifting lower as the European session wore on. Still, it remained less than 1% off record highs hit in early 2018.

European stocks, with the exception of London's FTSE (FTSE), were broadly lower (GDAXI) (FCHI) and U.S. equity futures also inched down (ESc1) (1YMc1) as a note of caution returned after a strong rally fueled by trade talk hopes.

The pan-European STOXX 600 (STOXX) remained within striking distance of four-year highs.

"The outlook is positive as world trade angst is the biggest negative out there, especially when you throw in loose policy, the pick-up yields for equities versus bonds and the like," said Chris Bailey, European strategist at Raymond James in London.

"However, the residual issues are clear: The first is a reversal in world trade optimism, the second is that valuations become perceived as overstretched - this can easily happen given lackluster corporate earnings growth."

In Asia, Alibaba shares (HK:9988) (N:BABA) opened almost 7% higher in Hong Kong than their issue price and at a small premium to pricing in New York. The listing has been seen as a vote of confidence in Hong Kong after months of anti-government protests that have rocked the financial hub.

A flurry of major acquisition activity has also supported sentiment in equity markets, with France's LVMH (PA:LVMH) agreeing to buy U.S. jeweler Tiffany (N:TIF) for $16.2 billion and Charles Schwab Corp (N:SCHW) set to purchase U.S. discount brokerage TD Ameritrade Holding Corp (O:AMTD) in an all-stock deal valued at $26 billion.

ALL ABOUT TRADE

Still, it was the outcome of U.S.-China trade talks that remained the key driver for world markets.

The U.S. dollar gave up earlier gains as some of the optimism over an agreement faded, slipping from a two-week high of 109.205 yen hit during Asian trade.

The euro was also a touch firmer at $1.10150 (EUR=EBS).

China's yuan - the currency most sensitive to the trade war - had risen to a one-week high of 7.0181 against the dollar, but was last trading at 7.0388 .

"China and the U.S. agreed on a framework to resolve their phase one issue, which is just a way of saying that they did admin work," said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The United States has imposed tariffs on Chinese goods in a 16-month dispute over trade practices that the U.S. government says are unfair. China has responded with its own tariffs on U.S. goods.

The next important date to watch is Dec. 15, when Washington is scheduled to impose even more tariffs on Chinese goods.

Safe-haven bond yields (DE10YT=RR) nudged back down, also reflecting the more cautious tone among investors.

The 10-year U.S. Treasury yield was last down 2 basis points on the day at around 1.75% (US10YT=RR).

Elsewhere, Bitcoin (BTC=BTSP), the world's biggest cryptocurrency, dipped to $7,065, holding above six-month lows hit on Monday after the People's Bank of China launched a fresh crackdown on cryptocurrencies.

U.S. crude (CLc1) was flat at $58 a barrel. Brent crude (LCOc1) was little changed at $63.71 per barrel.

World stocks edge off highs to await U.S.-China progress
 

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Comments (7)
Nelson diskin
Nelson diskin Nov 26, 2019 7:32AM ET
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whats next is going to be bull ? say
Peter Dikeakos
Peter Dikeakos Nov 26, 2019 7:14AM ET
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What's to happen without Money Laundering? Any answers?
Ni Ag
Ni Ag Nov 26, 2019 6:26AM ET
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there you go. Another "trade optimism" headline. his has become a milking cow for MM's and fake media.
Jamie Alehandro
Jamie Alehandro Nov 26, 2019 6:26AM ET
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absolutely agree
Jamie Alehandro
Jamie Alehandro Nov 26, 2019 6:17AM ET
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"trade optimism" is nothing more, but a fake
Miguel Vazquez Najar
Miguel Vazquez Najar Nov 26, 2019 5:39AM ET
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Winter is coming! And Buffet knows it. 128 billions of cash
TA XVCI
TA XVCI Nov 26, 2019 5:39AM ET
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Dalio is shorting his hedgefond for 1.5billion$. A sign of bears?
Miguel Vazquez Najar
Miguel Vazquez Najar Nov 26, 2019 5:39AM ET
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TA XVCI Black Friday tomorrow
John Chi
John Chi Nov 26, 2019 5:39AM ET
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TA XVCI He said it was not true?
lance smith
lance smith Nov 26, 2019 1:56AM ET
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don't invest in China or you will get hurt.
Song Li
Song Li Nov 26, 2019 1:56AM ET
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Agree chinese stock was extremtly volalities learned a big lesson. But they are good for long term but hard to digest those volalities movement..
lance smith
lance smith Nov 26, 2019 1:28AM ET
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Because they were brain washed in China to hate America and democracy, even after Chinese students came to US and became US citizen or got green card, MOST of them are anti-American and support the totalitarian evil Chinese communist government. They like to talk about and are proud of the Korean and Vietnam wars and *******Americans though they live in US.
holy piger
holy piger Nov 26, 2019 1:28AM ET
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so you are brainwashed to hate china, am i right?
Czech Trader
CzechTrader Nov 26, 2019 1:28AM ET
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I am from Czech republic. Long time ago it was komunist country. In 1989 we kicked komunists out and have chosen democracy. Now we have 30th anniversary and still are here lots of stupid people who want totality and komunism back.
Miguel Vazquez Najar
Miguel Vazquez Najar Nov 26, 2019 1:28AM ET
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holy piger hahaha You have the point
Xin Zhang
Xin Zhang Nov 26, 2019 1:28AM ET
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Cuz those students were usually from rich families, they benefit from the political connections a lot. So there is no wonder that they support the communist party and government. This is true especially regarding bachelor students in Australia, Canada, New Zealand, and England. The MINT students in PH.D. program are usually from mid-class, they answer the questions with a different attitude.
Abe Lincoln
Abe Lincoln Nov 26, 2019 1:28AM ET
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Czech Trader That's not true. You still have a Communist government! Don't Lie!
 
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