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GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars

Stock MarketsNov 17, 2019 05:32
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GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars

* European markets, MSCI world index battle to avoid weekly
* Kudlow says U.S., China getting close to trade deal
* Yen weakens, U.S. Treasury, European government yields
* Hong Kong, Chile markets battered by protests
* World FX rates in 2019
* Mixed week for commodities

By Marc Jones
LONDON, Nov 15 (Reuters) - Hopes of a U.S.-China trade deal
turned world stock markets and other risk assets higher on
Friday, though an escalating wave of global protests from Hong
Kong to Chile left some deep scars.
Europe's main bourses and Wall Street futures followed Asia
higher .EU .N after White House economic adviser Larry
Kudlow said on Thursday that the United States and China were
nearing a deal and talking every day. "We're getting close," he told an event at the Council on
Foreign Relations in Washington. "The mood music is pretty good,
and that has not always been so in these things."
It kept alive hopes that MSCI's 49-country world index
.MIWD00000PUS and Europe's STOXX 600 .STOXX could both avoid
their first weekly falls since the start of October, but it was
touch and go and others had little chance.
Emerging market stocks .MSCIEF were down 1.7% for the
week, after a violent escalation of pro-democracy demonstrations
in Hong Kong had left the Hang Seng down 4.7% .HSI , its worst
weekly performance in four months.
Chinese blue-chip shares .CSI300 ended the day down 0.75%
and 2.4% for the week, which was their biggest fall since
August. Fierce anti-government protests in Chile means its
currency could have its worst week since 2011 with a 7% plunge
"The politics of anger is an important element that one
needs to take account off," UBP's EM macro and FX strategist
Koon Chow said. "Populations are feeling left behind even during
the upswing. You have to wonder what happens when people start
losing their jobs."
Shane Oliver, chief economist at AMP Capital in Sydney,
likened regional markets' bullish reaction to positive trade
news to being in a relationship with an alcoholic, driven by
entrenched hopes for recovery.
U.S. Commerce Secretary Wilbur Ross said there would be a
call between U.S. and Chinese officials later in the day as both
sides continue to hammer out a phase one trade pact, but added
U.S. tariffs on Chinese imports could still start Dec. 15.
"Markets want to believe that there will be some sort of
resolution to this issue, some sort of lasting truce at least,
even though the experience of the last 18 months doesn't give a
lot of cause for comfort," AMP's Oliver said.
However, weaker Chinese and U.S. economies as well as the
U.S. presidential election next year put pressure on both sides
to come to an agreement, he added.

In currencies, the safe-haven yen JPY= weakened, with the
dollar rising 0.3% to buy 108.73 yen. The euro EUR= was barely
changed at $1.1023 and the dollar index, which tracks the
greenback against a basket of six major rivals .DXY , was off
just 0.02% at 98.129.
Higher U.S. Treasury yields also illustrated the risk-on
tone in the Asian session, with the 10-year yield US10YT=RR
rising to 1.845% from a U.S. close of 1.815% on Thursday.
The policy-sensitive two-year yield rose to 1.6101% from
1.593% on Thursday after U.S. Federal Reserve Chair Jerome
Powell said the risk of the U.S. economy facing a dramatic bust
is remote. A Reuters poll of more than 100 economists showed that while
concerns have eased over a U.S. recession, few see an economic
rebound, and most believe a trade truce is unlikely in the
coming year. VS CHINA
Government borrowing costs in Germany and France also inched
up on Friday, but were set for sizeable weekly declines, in
contrast to southern European countries that have come under
heavy selling pressure again this week.
Germany's 10-year Bund yield was at -0.33% DE10YT=RR , off
more than one-week lows hit on Thursday. But it is down 8 bps on
the week, set for the biggest weekly fall since mid-August.
Dutch 10-year bond yields are down 7 bps this week, and French
yields are 5 bps lower NL10YT=RR , FR10YT=RR .
Data on Thursday had showed Germany's economy grew just 0.1%
in the third quarter, with consumer spending helping the country
to avoid a mild contraction and a technical recession of two
quarters of economic shrinkage.
"In general, there has been risk aversion in recent days and
a shift to core bond markets from the periphery," said Daniel
Lenz, a rates strategist at DZ Bank.
Global sentiment has been buffeted in recent weeks by
conflicting assessments of progress in talks between the United
States and China aimed at ending their 16-month-long trade war.
China's commerce ministry said the two countries are holding
"in-depth" discussions on the first-phase trade pact, and that
cancelling tariffs is an important condition to reaching a deal.
China has also ended a nearly five-year ban on imports of
U.S. poultry meat, which the U.S. Trade Representative said
would lead to more than $1 billion in annual shipments to China.
Those developments followed comments from officials from
both countries last week that they had a deal to roll back
tariffs, only to have U.S. President Donald Trump deny that any
such deal had been agreed to. The new record for the S&P, which gained just 0.08% to
3,096.63, came despite a grim outlook from network gear maker
Cisco Systems CSCO.O that underlined the impact of trade
In commodity markets, U.S. crude prices seesawed after
sliding Thursday on rising U.S. crude inventories. U.S. West
Texas Intermediate crude CLc1 stumbled from $57.02 to $56.67 a
Global benchmark Brent crude LCOc1 slipped 0.5% to just
below $62 per barrel on the way to a modest weekly fall.
Gold retreated from gains that had been prompted by trade
uncertainty. Spot gold XAU= was last trading at $1,463.90 per
ounce, down 0.48%. GOL/

($1 = 6.9941 Chinese yuan)

Hang Seng set for worst week in nearly 4 months

GLOBAL MARKETS-U.S.-China trade hopes revive stocks, protests leave scars

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