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Global Stocks Move Higher After a Bumpy Week

Global stocks ticked up on Friday after a tumultuous week in markets, when investors had grappled with mixed news from U.S.-China trade talks, a breakdown in conversations on denuclearization in North Korea and a slew of new economic data.

In Europe, the Stoxx Europe 600 was up 0.5 % in morning trading. Futures pointed to opening rebounds of 0.4% for the Dow Jones Industrial Average and the S&P 500.

Asian stocks also gained, with the Shanghai Stock Exchange rising 1.8%, Hong Kong’s Hang Seng Index up 0.6% and Japan’s Nikkei up 1%.

Mainland Chinese stocks were helped by global index provider MSCI’s decision to more than quadruple the nation’s weighting in its global benchmarks this year.

Global markets have oscillated this week with major U.S. indexes set to end a three-day losing streak on Friday, as investors wrapped their heads around fresh economic data.

Figures from China’s National Bureau of Statistics on Thursday showed the official manufacturing purchasing managers index dropped to its lowest level in three years in February, reinforcing concerns about global growth.

Meanwhile, the U.S. economy expanded at a 2.6% annual rate in the last quarter of 2018, new data showed Thursday, slowing from 3.4% in the previous three-month period.

Investors are still concerned, in particular, about how long the expansion in the U.S. economy can continue. President Trump’s tax policy buoyed growth in 2018, but Erik Nielsen, chief economist at UniCredit in London, said it is difficult to know how long that boost will last.

“We have a big trouble finding out what multipliers to use, what lags to use because we haven’t had such a big expansion at the top of the cycle before,” Mr. Nielsen said.

Meanwhile, markets were digesting the U.S. decision to abandon for now its threat to raise tariffs to 25% on $200 billion of Chinese goods. Even if the softer tone suggests a trade agreement is near, many fear a resolution to the current conflict around intellectual property and the U.S. trade surplus may not be the end of U.S.-China rivalry.

“We have started the big battle, the decadeslong battle, between the U.S. and China,” Mr. Nielsen said.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was up 0.1% on Friday.

The 10-year U.S. Treasury edged up to 2.720%, from 2.711% on Thursday. Yields move inversely to prices.

Markets were also roiled this week by an escalation in the conflict between India and Pakistan, but Indian investors were signaling optimism by Friday.

“It’s generally led to buying opportunities,” said David Cornell, chief investment officer of the India Capital Growth Fund. “I think the market has over time become quite immune to the saber rattling that periodically happens between the two countries, and very often happens around election times.”

India’s benchmark Sensex index was up 0.3% on Friday, having dropped sharply earlier in the past week.

Ravi Singh, head of technical research at Karvy Stock Broking in Hyderabad, said Prime Minister Narendra Modi has gained public support for his aggressive reaction to the Kashmir attack, raising the chances that his pro-business administration will win re-election in India’s coming vote.

“On the economic front it may cause some damage but overall sentiment is important and if there is going to be election in a few months the current government benefits from the sentiment,” he added.

Meanwhile, in the U.K. the opposition Labour Party has confirmed it would support a second referendum on membership of the European Union, while Prime Minister Theresa May has agreed to allow Parliament to delay Brexit, which many analysts say raises the chances that the nation’s withdrawal from the bloc will be put off past the March deadline.

“Markets are rejoicing already,” analysts at Rabobank wrote in a recent note to clients. “Anything to avoid facing the pain.”

Sterling was down 0.2% on the dollar and broadly flat against the euro Friday. The FTSE 100 index, which is dominated by large international businesses, gained 0.6% while the FTSE 250 was up 0.3%.

Elsewhere in commodities, global benchmark Brent crude oil was up 0.8% at $66.82 a barrel.

Source: Dow Jones

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