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Trade Prospects Lift Global Stocks

Global stocks inched higher Friday as trade prospects appeared to improve, putting most major indexes on track for weekly gains.

The Stoxx Europe 600 was up 0.2% in morning trading, while markets in Asia closed higher and futures pointed to a 0.2% opening rise for the S&P 500 after notching its biggest gain in two weeks.

Stocks have swung back and forth in recent sessions as investors attempt to assess the potential impact of new trade agreements on supply chains and the global economy.

The latest boost for stocks appeared to come from news the Trump administration is giving Beijing another chance to try to stave off new tariffs on $200 billion in Chinese exports, asking top officials for a fresh round of trade talks later this month, The Wall Street Journal reported earlier this week.

“What’s driving intraday volatility and choppiness in the market? It’s going to be trade,” said Shawn Cruz, who manages trading strategy at TD Ameritrade. “We still haven’t seen what’s actually going to get put in place…so it’s more or less a risk aversion exercise.”

Softness in the U.S. dollar and stabilization in some emerging markets has also helped improve investors’ appetite for risk, analysts said.

The ICE Dollar Index was down 0.1% on Friday, on track to end the week about 1% lower. Many emerging-market currencies have gained ground this week, with the Turkish lira rising around 5% as the central bank sharply raised interest rates. The South African rand is up 3% against the dollar this week while the Mexican peso is up 2.6%.

In contrast, the Argentine peso and Brazilian real were sitting on sharp losses.

Shoqat Bunglawala, head of the global portfolio solutions group for EMEA and Asia Pacific at Goldman Sachs Asset Management, said he is cautious on emerging markets in the short term because of issues largely stemming from market sentiment and volatility, but in the medium term, “we’re still very positive on emerging markets.”

Many emerging markets are in a substantially better position that they were a few years ago, he said, pointing to improvements in earnings growth and well-anchored inflation.

In Europe on Friday, shares of auto and mining companies were among the biggest advancers, while utility companies — which tend to outperform during times of economic weakness as investors seek stability — lagged behind.

Asian stocks were broadly higher, with benchmarks in Japan, Hong Kong and South Korea up 1% or more. Japan’s Nikkei closed at its highest level since early February.

Shanghai stocks edged down 0.2%. Investment in factories, railways and other projects in China so far this year grew at its slowest pace in more than a quarter-century, data showed.

U.S. retail sales figures for August are due later Friday after data showed Americans boosted their spending in July. Another strong reading would be important for market sentiment, particularly for shares of consumer-oriented stocks, in light of a recent pickup in wage growth, said Mr. Cruz.

A robust economy drove U.S. wages higher in August, data showed last week, with private-sector hourly wages growing 2.9% from a year earlier, the fastest pace since mid-2009.

“If that’s not translating into retail spending, retailers will feel the brunt of that move” as it costs more to pay their employees, he said.
Source: Dow Jones

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