US stocks set to follow European rise as global trade tensions ease

US equities followed European and Asian markets higher on Tuesday as investors balanced the easing of international trade tension with the prospect of fresh government stimulus in China.

The S&P 500 was up 0.3 per cent following the open on Wall Street, adding to its longest winning streak in two months. On Monday, the benchmark closed higher for its fifth session in a row, as the likelihood of lower interest rates and a US-Mexico deal to avert tariffs lifted market sentiment.

European bourses extended earlier gains. Germany’s trade-sensitive Dax 30 advanced 1.1 per cent, while in London the FTSE 100 added 0.4 per cent. The Europe-wide Stoxx 600 rose 0.8 per cent.

“While President Trump’s swift resolution of the dispute with Mexico is positive, we see a bumpier road ahead for negotiations with China,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“Our base case is for a deal to be reached eventually, but focus is now turning to the G20 summit at the end of the month,” Mr Haefele added. “We see only a 20 per cent chance that an agreement is announced by then.”

A rally in Asia with the main indices posting gains had earlier set the pace for Europe. China’s CSI 300 posted the biggest rise at 3 per cent by the end of play and Hong Kong’s Hang Seng closed 0.8 per cent higher. Infrastructure stocks in particular rose after Beijing encouraged local governments to use special bonds for projects to bolster economic growth. 

In currency markets, the pound was back above $1.27, rising 0.2 per cent against the US dollar after Tuesday’s jobs data showed the UK labour market remained resilient in the three months to April.

The tightly controlled onshore renminbi bounced 0.3 per cent off its weakest level in six months on Tuesday. The central bank governor on Monday had hinted that he did not object to the currency falling beyond a certain level. Should the renminbi slip past Rmb7 to the dollar, it would hit a level not struck since the depths of the global financial crisis 11 years ago.

Among commodities, the benchmark Brent crude oil price rose 0.2 per cent to $62.40 a barrel while gold, traditionally considered a haven during unsettled times for investors, fell 0.3 per cent. Last week prices for the precious metal hit a 14-month high as investors increased their bets on interest rate cuts this year.

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