World stocks soar, dollar dips, yuan up on China-U.S. trade war ceasefire

NEW YORK (Reuters) – A truce in the U.S.-China trade war boosted global stocks to their highest in roughly three weeks on Monday, while sending the dollar lower and the Chinese yuan and several trade-dependent currencies higher.

The rally in equities follows an agreement between Washington and Beijing at the G20 summit in Argentina on Saturday that calls for a 90-day trade tariff truce. Oil prices jumped more than 3 percent.

“Today is mostly about celebrating the fact that the U.S. and China have delayed what could have been the some of the worst-case scenarios regarding their trade relations,” said Michael Arone, chief investment strategist at State Street Global Advisors.

The Dow Jones Industrial Average .DJI rose 243.98 points, or 0.96 percent, to 25,782.44, the S&P 500 .SPX gained 25.02 points, or 0.91 percent, to 2,785.19 and the Nasdaq Composite .IXIC added 88.86 points, or 1.21 percent, to 7,419.40.

The pan-European STOXX 600 index rose 1.03 percent.

U.S. President Donald Trump said China has agreed to “reduce and remove” tariffs below the 40 percent level currently charged on U.S.-made vehicles. That helped boost shares of European automakers more than 3 percent .SXAP.

The White House also said the existing 10 percent tariffs on $200 billion worth of Chinese goods would be increased to 25 percent if no deal was reached within 90 days.

MSCI’s all-country world index .MIWD00000PUS climbed 0.25 percent, its sixth straight daily gain.

The U.S. dollar fell broadly as currencies battered by trade tensions staged a comeback.

“The G20, the dinner in particular, has ignited quite a robust risk rally and that’s coming at the dollar’s expense,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.China’s offshore yuan CNH= gained about 1 percent to 6.8796. The Australian dollar, viewed as a barometer of Chinese growth, was 0.5 percent higher against the greenback.

The New Zealand dollar NZD= gained 0.6 percent, while the U.S. dollar lost 0.6 percent against the Canadian dollar CAD=.

Sterling gave up early gains and dived to its lowest since the end of October as investors dumped the currency on growing concerns about British parliamentary approval for a Brexit deal.

“Until the British parliament votes on the deal next week we are going to see a steady drum beat of Brexit headlines, which is going to keep the pound weak,” Danske Bank strategist Morten Helt said. Lawmakers are to vote Dec. 11 on Prime Minister Theresa May’s agreement on leaving the European Union.

U.S. Treasury yields rose after the U.S.-China deal boosted stocks and reduced demand for safe-haven U.S. debt, but they reversed course at midday as risk appetite faded.

Germany’s 10-year government bond, the benchmark for the euro area, initially rose four basis points to 0.347 percent DE10YT=RR, then eased back to 0.3 percent.

Yields on riskier southern European bonds were down across the board. Italian bond yields hit their lowest level in just over two months on reports that Rome was negotiating a lower budget deficit with the EU and a new capital key from the European Central Bank.

Oil prices got an extra boost as Canada’s Alberta province ordered a production cut, while OPEC and allied exporting countries looked set to reduce supply.

U.S. crude oil futures settled at $52.95 per barrel, up 3.97 percent. Brent crude futures settled at $61.69 per barrel, up 3.75 percent.

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