Equities inch higher on U.S.-China talks report

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NEW YORK (Reuters) – Stock markets edged up globally on Tuesday on a report that the United States and China were seeking to resume talks to defuse a budding trade war, while the dollar rose against the yen after the Bank of Japan said it intends to keep interest rates low.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., July 24, 2018. REUTERS/Brendan McDermid

Representatives of U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He have been speaking privately as they seek to restart negotiations and avoid a full-scale trade war, Bloomberg reported, citing sources.

“The most important influence on the markets today is some tempering of the trade war escalation,” said Bill Northey, senior vice president at U.S. Bank Wealth Management in Helena, Montana.

Stocks rebounded on the news, with regional indexes for Britain’s FTSE 100, Germany’s DAX and France’s CAC 40 all climbing.

The pan-European FTSEurofirst 300 index of leading regional shares closed up 0.38 percent while MSCI’s gauge of stocks across the globe gained 0.27 percent.

The Dow Jones Industrial Average rose 146.74 points, or 0.58 percent, to 25,453.57, the S&P 500 gained 17.27 points, or 0.62 percent, to 2,819.87 and the Nasdaq Composite added 57.61 points, or 0.76 percent, to 7,687.62.[L4N1UR6DC]

The market has withstood the recent technology sell-off and fears of a full-blown trade war remarkably well, said Hank Smith, co-chief investment officer at Haverford Trust in Radnor, Pennsylvania.

U.S. President Donald Trump pays attention to the stock market and if there were a significant sell-off on trade tariff headlines, Smith said, Trump would reverse positions.

“The economy has momentum to withstand these tit-for-tat trade spats that are going on right now. The market is, at least for now, seeing this as negotiations as opposed to the beginning of an all out-out global trade war,” Smith said.

Meanwhile, Bank of Japan reassurances that it will maintain super-easy monetary policies for an “extended period of time” pushed the yen down and bond yields lower worldwide.

The dollar firmed 0.75 percent against the yen, putting it on pace for its best day in nearly three weeks, after the BOJ said it would keep rates “very low” in comments that brought some relief to a market that had braced for bigger changes. The benchmark 10-year Japanese government bond dropped five basis points after the announcement.

Investors await meetings of the U.S. Federal Reserve on Tuesday and Wednesday and the Bank of England on Thursday.

“We still have a decent amount of news ahead of us,” said George Goncalves, head of U.S. rate strategy at Nomura Securities International.

Benchmark 10-year U.S. Treasury notes last rose 3/32 in price to yield 2.9635 percent.

In oil, prices fell and were poised for their largest monthly decline in two years as the market focused on U.S.-Iranian tensions and priced in news that output by the Organization of Petroleum Exporting Countries reached a 2018 high in July.

October Brent crude futures fell 72 cents to $74.25 a barrel. U.S. crude futures fell $1.37 to $68.76.

Brent has declined about 6 percent this month, in its largest one-month slide since July 2016.

Additional reporting by Herb Lash and Kate Duguid in New York; Editing by Nick Zieminski and Steve Orlofsky

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