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Home / Business / GLOBAL MARKETS world stocks benefit from a relief rally even though trading tensions continue

GLOBAL MARKETS world stocks benefit from a relief rally even though trading tensions continue



* World stocks recover in Asia, Rally in Europe

* 1.70 Bill. Dollar Market Capitalization Lost since June 12

* Chinese Yuan Records Record Low

* Dollar Strongest Quarter since 2016

* Euro Rises to EU Summit

* Chart: World Currency Rates in 2018 tmsnrt.rs/2egbfVh

By Helen Reid

LONDON, June 29 (Reuters) – Friday's global equities rallied strongly, European equities rebounding from a turbulent sales week as investor concerns about higher barriers to trade drew closer.

The MSCI Global Stock Index rose 0.5 percent at 1045 GMT. This was the strongest gain in three weeks, but the second quarter was still in the red as investors set US tariffs for next week.

The US government is due to activate tariffs on $ 34 billion worth of Chinese goods on July 6, which are expected to trigger a tit-for-tat move from Beijing.

European equities rallied strongly, with the pan-European STOXX 600 up 1

percent and the trade-sensitive DAX up 1.2 percent.

U.S. Stock futures also rose 0.3 to 0.4 percent, although they soon gave in shortly after Axios said that US President Donald Trump has repeatedly told his staff he wants to withdraw from the World Trade Organization.

It has been the latest sign of increased investor sensitivity to signs of deepening trade disparities. Tariff disputes have already turned assets from the Chinese yuan into European car stocks and have reduced the value of world stocks since June 12 by $ 1.75 trillion.

The euro jumped to $ 1.1635 after leaders reached a 0.6 percent agreement at an EU summit. This has dampened the governing coalition of Chancellor Angela Merkel on this issue.

"The outcome of the summit tells us something about the seriousness of the situation," said Jan von Gerich, chief analyst at Nordea in Helsinki.

"I am not confident that it will solve the underlying problems, but there was a fear that the summit would fail and we could get a collapse of the German government, so that the risk premium is priced out," he said.

STOCKS GAIN, YUAN PAIN

As Asian stocks rallied, the Chinese yuan suffered its worst month to date, losing 3 percent against the dollar in June, as investors pulled money out of a market likely to be under higher trade barriers suffered.

The Chinese yuan was trading at 6.6441 on Friday, its lowest level since November, as investors speculated that China might try to devalue its currency to offset higher tariffs.

"We continue to believe that the Yuan Movements are largely reflecting exchange rate fluctuations and are not indicative of a concerted devaluation strategy," said BBH currency strategists.

Despite Friday's gains, the CSI300 and the Shanghai Composite are the worst indices in the world this year.

In stark contrast to the yuan, the US dollar has been betting on its strongest quarterly gains since the fourth quarter of 2016, helped by the US Federal Reserve's June rate hike and expectations of further interest rate hikes this year.

The dollar index fell 0.5 percentage points to 94,924 on the day the euro rose, and the greenback gained 0.1 percent against the yen at 110.65.

European bonds divergened, while the EU Summit Migration Agreement pushed yields on German Bunds higher, while yields on Italian 10yr government bonds fell to a weekly low. [10809002] The 10-year Treasury benchmark benchmark yield remained stable at 2.8419 percent and the yield curve widened slightly to 33.3 basis points.

Some investors see their flattening as a sign that the recession is imminent.

The heightened fears of trade tariffs contrasted with a still strong picture of the global economy and robust corporate earnings growth.

"Our assessment for this year was that investment markets would likely be lagging behind the real economy, as stronger growth momentum, stricter financial conditions, higher inflation and higher volatility would weigh on valuations, even if EPS trends remain solid," Morgan Stanley analysts said Thursday they lowered their index targets for MSCI Europe.

Despite tensions in the trading environment, the STOXX 600 has remained on track since the first quarter of 2017, and the British FTSE 100 has posted the largest quarterly gain since 2010.

The oil price extended its gains to new highs in a narrower market than the US dollar US sanctions against Iran threatened to remove a significant volume of crude oil from global markets as demand increases.

U.S. Crude oil rose 0.04 percent to $ 73.49 a barrel. Brent crude rose 0.2 percent to $ 78.01 a barrel.

Gold remained close to 6 1/2-month lows, buoyed by concerns about trade, interest rate expectations and the strong dollar.

Spot gold rose 0.2 percent to $ 1250.81 an ounce, but still hit the worst monthly performance since November 2016.

Emerging markets gained 1.9 percent, reaching a monthly low in the previous session. The index was still at its worst month since January 2016 as the emerging dollar hit emerging markets.

Reporting by Helen Reid
Arrangement by Robin Pomeroy and Peter Graff


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