U.S.-China trade optimism lifts stocks, dollar shrugs

By Marc Jones

LONDON (Reuters) - Positive noises from China on U.S. trade talks lifted European stocks and Wall Street futures on Thursday and snuffed out a modest rally in safe-haven assets that had dominated in Asia.

Europe's main bourses had initially stuttered but muscled 0.7% higher after China said it was in close communication with Washington and preparing to make progress in upcoming trade talks. (EU)

U.S. President Donald Trump had stoked trade hopes on Wednesday when he told reporters the two sides were having "good conversations" and that an agreement "could happen sooner than you think".

The euro hitting a 28-month low also helped euro zone bond markets as traders chewed over the third German resignation from the European Central Bank's board since 2011.

It had amplified doubts around the sustainability of the bank's aggressive stimulus measures -- Germany, France and the Netherlands have all voiced criticism -- but after a brief early wobble, bond yields went 1-2 basis points lower.,,.

The major currencies barely budged either, having become largely inured to the constant toing and froing of the more-than year-long trade war.

Just on Tuesday, Trump had sharply criticized China in a speech at the United Nations General Assembly, where he said he would not accept a "bad deal".

"I think the trade talks will take years if it ever has a solution," Makor Capital Markets strategist, Stéphane Barbier de la Serre, said.

"To me, what we see (today) is just market expectations, it is purely micro management of the market, nothing else. We are nearing a point where nobody cares about the discussions."

The sidewinding dollar was short of a two-year high against a basket of top currencies through it did manage a 28-month peak against the euro.

It had shrugged off impeachment calls surrounding Trump after transcripts showed he had nudged Ukraine's president for possible disparaging information on 2020 presidential race rival Joe Biden.

"Even if you go through with articles on impeachment, it gets voted on and passes the House (of Representatives), you still need a two-thirds majority in the Senate and that seems very, very unlikely to occur give the balance of power," said Eaton (NYSE:ETN) Vance's Co-Director of Global Income, Eric Stein.

CUT AND RUN

London's heavyweight FTSE 100 led Europe's stocks gains with 1% jump, with almost all the region's sectors - barring banks - higher. (EU)

The biggest currency riser of the day was the New Zealand dollar, which climbed 0.6% to $0.6305 after the head of the country's central bank said it was unlikely to need unconventional stimulus measures.

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Elsewhere in Asia-Pacific, the Philippines joined the army of global central banks that have cut interest rates this month, with a 25 basis point trim to 4%. Mexico is expected to slice its 8% rate by a similar amount later too.

Much of the rest of Asia had lacked clear direction. MSCI's broadest regional index and Japan's Nikkei both ended fractionally higher helped by a limited trade deal between Japan and the United States..

But major China tech stocks slumped more than 3% for the second day running, Australian shares fell 0.5% and gold gained for the fifth day in the last six in a sign that some investors were still seeking out safety.

For commodities, copper held steady in metals markets while oil swung in and out of the red with Brent fetching $62.52 a barrel and U.S. crude $56.50.

"With the swift resolution of production outages and resilience of Saudi’s oil sector, barring a repeat of drone attacks, the oil market’s focus will, in our opinion, return to the economy and trade wars," global oil strategist Harry Tchilinguirian told the Reuters Global Oil Forum.