Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious OutperformanceFind Stocks Now

Trade hopes, Turkey rate hike feed the bulls

Published 09/13/2018, 10:40 AM
Updated 09/13/2018, 10:40 AM
© Reuters. Traders work on the floor of the NYSE in New York

By Trevor Hunnicutt

NEW YORK (Reuters) - Signs of movement in the U.S.-China trade stand-off and a rate hike in emerging market trouble spot Turkey sent an index of global stocks higher on Thursday as risk appetite returned.

Wall Street (N) opened higher, following broad gains in Europe (EU) and Asia's major markets (SS), after news that U.S. President Donald Trump's administration had put out feelers to Beijing for a new round of trade talks.

Turkey's central bank also made a rare show of independence, ignoring a fresh bashing from President Tayyip Erdogan and jacking up its interest rates by more than one-third to 24 percent.

MSCI's 47-country world index rose for a fourth straight day of gains, gaining 0.72 percent.

The pan-European FTSEurofirst 300 index rose 0.22 percent, while MSCI's broad emerging market stock index leapt 1.56 percent.

The Dow Jones Industrial Average rose 177.48 points, or 0.68 percent, to 26,176.4, the S&P 500 gained 16.18 points, or 0.56 percent, to 2,905.1 and the Nasdaq Composite added 68.69 points, or 0.86 percent, to 8,022.92.

"There have been a lot of obvious headwinds to risk appetite over the summer," said State Street Global Markets' head of global macro strategy, Michael Metcalfe.

"I just get the sense this week we are beginning to see some light through the clouds."

Washington's invitation for trade talks received a thumbs-up from Beijing. Trump had earlier threatened to impose tariffs on practically all imports from China unless the country offered concessions.

The dollar, which has been a safe haven from trade disputes, fell 0.31 percent against a basket of other major currencies.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

U.S. consumer prices rose less than expected in August as increases in gasoline and rents were offset by declines in healthcare and apparel costs, and underlying inflation pressures also appeared to be slowing, data showed on Thursday.

A slackening of inflation could slow the Federal Reserve's pace of rate hikes, and U.S. bond yields fell to session lows after the release of the consumer price report, before rebounding. Benchmark 10-year notes dropped 1/32 in price to yield 2.9645 percent, compared with 2.963 percent late on Wednesday.

The euro rose 0.54 percent to $1.1687. European Central Bank President Mario Draghi said the strength of the European economy continues to support confidence but added that inflation is likely to hover at current levels. The ECB kept its rates deep in negative territory as expected.

The day's big move in currency markets occurred in Turkey's lira. It fell 3 percent after Erdogan called for rate cuts and then surged to be up 3 percent on the day when those calls were ignored.

The lira's rally comes after a more than 40 percent slump against the dollar this year, caused in part by a diplomatic disagreement between Ankara and Washington.

Inflation in Turkey is now almost 20 percent and the crisis there has spread to some other emerging market countries with weak economic fundamentals, such as sizable current account deficits.

"Hiking today does get Turkey on the slow road to recovering some monetary policy credibility, and that is critical," said Aberdeen Standard Investments head of emerging market debt Brett Diment.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

"If they hadn't hiked today then the real risk was that the lira would sell off sharply again and the country would swiftly head towards a balance of payments and even a banking crisis."

The lira traded at 6.16 per dollar, well off its record low of 7.24 reached a month ago.

Among commodities, oil prices fell on doubts about growth of demand for fuel, reversing some of the strong gains from the previous session.

U.S. crude dropped 1.02 percent to $69.65 per barrel and Brent was last at $79.19, down 0.69 percent on the day. [O/R]

Graphic: Turkey's real effective exchange rate - https://reut.rs/2p0Vm7L

Graphic: Global currencies vs. dollar - http://tmsnrt.rs/2egbfVh

Graphic: Emerging markets in 2018 - http://tmsnrt.rs/2ihRugV

Graphic: Global assets in 2018 - http://tmsnrt.rs/2jvdmXl

Graphic: MSCI All Country World Index Market Cap - http://tmsnrt.rs/2EmTD6j

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.