February 6, 2020 / 3:51 AM / 20 days ago

Global stocks rally, safe-haven currencies drop, on China plan to cut tariffs

NEW YORK (Reuters) - World equity markets rallied for a fourth day on Thursday, with key stock indexes touching fresh peaks, as news that China plans to cut tariffs in half on some U.S. goods buoyed risk sentiment and pushed safe-haven currencies lower.

Investors look at screens showing stock information at a brokerage house in Shanghai, China January 16, 2020. REUTERS/Aly Song

The yield on Germany’s benchmark 10-year Bund touched its highest in almost two weeks as investors bet China’s efforts to contain the deadly coronavirus would mitigate its impact on the global economy.

The death toll in mainland China jumped by 73 to 563, with more than 28,000 infections confirmed.

U.S. Treasury Secretary Steven Mnuchin, in an interview with Fox Business Network, downplayed concerns that the outbreak could affect global supply chains, but said “this is something we’re monitoring very carefully.”

Major indexes - including the STOXX Europe 600 of small-, mid- and large-cap stocks, the Nasdaq .IXIC, benchmark S&P 500 .SPX and Dow industrials .DJI on Wall Street; and the S&P/TSX composite .GSPTSE in Toronto - set intraday and closing records.

The yen slid to a two-week low against the dollar and the Swiss franc fell to its weakest in more than a week as investors hailed news China would halve tariffs here on 1,717 U.S. goods.

Many risk-off moves taken over the past two weeks are being unwound, said Simon Harvey, an FX market analyst at Monex Europe in London.

“We’re seeing credible responses from monetary authorities in China and it looks like it’s soothing market fears of a more entrenched slowdown in the Chinese economy,” Harvey said.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.55%, just half a percentage point shy of a record set three weeks ago, and its emerging markets index rose 1.06%.

The pan-European STOXX 600 index advanced 0.44%, helped by a swath of strong earnings reports. The euro zone banks index .SX7E posted its biggest daily gain in a month.

Indexes in Frankfurt .GDAXI, Paris .FCHI and London .FTSE all gained, rising between 0.3% and 0.9%.

The Dow Jones Industrial Average .DJI rose 88.92 points, or 0.3%, to 29,379.77. The S&P 500 .SPX gained 11.09 points, or 0.33%, to 3,345.78 and the Nasdaq Composite .IXIC added 63.47 points, or 0.67%, to 9,572.15.

Rebounding worker productivity in the fourth quarter and other U.S. economic data also lifted sentiment on Wall Street.

The number of Americans filing for unemployment benefits dropped to a nine-month low last week.

The dollar index .DXY rose 0.17%, with the euro EUR= down 0.15% to $1.0981. The yen JPY= weakened 0.14% versus the greenback at 109.99 per dollar.

Gold rose on expectations central banks will keep interest rates low. U.S. gold futures GCcv1 settled up 0.5% at $1,570 an ounce.

Bond yields in Europe were pressured upward by remarks from European Central Bank President Christine Lagarde that euro zone growth remains modest but there are signs of stabilization.

Germany’s Bund yield rose as much as 3 basis points to -0.339%, its highest in almost two weeks DE10YT=RR, before pulling back to around -0.39%.

U.S. Treasury yields were little changed after earlier trading higher. Benchmark 10-year U.S. Treasury notes US10YT=RR rose 2/32 in price to push its yield down to 1.6439%.

Brent crude gave up early gains as the Organization of the Petroleum Exporting Countries and Russia gave mixed signals about possible further output cuts to counter concerns about weak demand due to the coronavirus epidemic.

Brent LCOc1 fell by 35 cents to settle at $54.93 a barrel while West Texas Intermediate CLc1 rose 20 cents to settle at $51.07 a barrel.

Reporting by Herbert Lash, additional reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Bernadette Baum, David Gregorio and Jonathan Oatis

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