NEW YORK: Global equity markets rebounded on Tuesday on a report that said the United States and China hoped to resume talks to defuse a budding trade war, while the dollar jumped against the yen after the Bank of Japan said it intends to keep interest rates low.
BOJ reassurances that it will maintain its super-easy monetary policies for an “extended period of time” pushed the yen down and global bond yields lower.
The dollar firmed 0.75 percent against the yen, putting it on pace for its best day in nearly three weeks, after BOJ said it would keep rates “very low” in comments that brought some relief to a market that had braced for bigger changes.
While the benchmark 10-year Japanese government bond dropped 5 basis points after the announcement, investors await meetings by 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. rates strategy at Nomura Securities International.
Stocks rebounded, 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 0.29 percent.
The Dow Jones Industrial Average rose 144.27 points, or 0.57 percent, to 25,451.1. The S&P 500 gained 17.11 points, or 0.61 percent, to 2,819.71 and the Nasdaq Composite added 59.59 points, or 0.78 percent, to 7,689.60.
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 the Philadelphia suburb of 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 he believes 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.
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 of output by the Organization of Petroleum Exporting Countries reaching a 2018 high in July.
October Brent crude futures fell 71 cents to $74.84 a barrel. The September contract, which expires later on Tuesday, traded at $74.36. U.S. crude futures fell $1.13 to $69.00.
Brent has lost about 6 percent this month, in its largest one-month slide since July 2016.
A rally in euro zone government bonds faded after preliminary data showed inflation in the bloc was higher than expected in July.
Germany’s 10-year bond yield was slightly lower at 0.439 percent.
Benchmark U.S. 10-year Treasury notes rose 5/32 in price to yield 2.958 percent.