U.S. Stocks Hit Record on Trade Truce; Bonds Drop: Markets Wrap

(Bloomberg) -- U.S. stocks rallied to all-time highs after a trade truce with China, though finished well off highs of the day as measures of manufacturing activity showed growth slowing in the world's largest economy. Treasuries fell with gold

The S&P 500 ended at a record for the first time in 10 days, led by a surge in chipmakers after President Donald Trump agreed to ease a ban on American companies supplying Chinese tech giant Huawei. The Nasdaq 100 hit a two-month high. Industrial shares underperformed, as a U.S. manufacturing gauge showed orders stalled last month.

“The rally on this news will probably be short-lived and then we'll go back to worrying about very weak growth data,” Ed Campbell, portfolio manager and managing director at QMA, said in an interview.

The U.S. data came after a series of weak factory reports from major economies around world reaffirmed speculation that global central banks will remain on track with easier monetary policy. The 10-year Treasury yield climbed even as futures traders still priced in almost 75 basis points of rate cuts this year by the Federal Reserve. Gold slid 1.4%.

Crude advanced toward $60 a barrel, after major producers agreed to extend output cuts. Stocks in Shanghai and Tokyo led Asian gains, while markets in Hong Kong were closed for a holiday as a new wave of unrest hit the city.

Traders seem cautiously optimistic in the wake of the G-20 gathering, though the move to delay further tariffs and resume talks doesn't offer much clarity on the critical issues. Investors have also been assessing global growth as a series of major purchasing manager readings on Monday morning showed declines. U.S. factory data are also due today.

In Europe, the euro trimmed a decline and European bonds were mixed as data showed manufacturers in the region remained firmly stuck in a slump last month, and as leaders failed again to agree who will fill key European Union roles, including the presidency of the central bank. Italian bonds surged, reflecting optimism that the European Commission won't penalize the nation this summer over its budget deficit. The pound weakened as a U.K. factory gauge contracted.

Elsewhere, the lira rallied after Trump indicated he may reassess his threats to sanction Turkey if it goes ahead with a Russian missile purchase. Swiss stocks rose as much as 1.3% as never-before-tested provisions to safeguard liquidity kicked in following a showdown with the European Union. Gold dropped the most in a year.

Here are some key events coming up:

• Boris Johnson and Jeremy Hunt continue their campaign to be the next U.K. prime minister.
• The U.S. celebrates the Independence Day holiday on Thursday.
• The U.S. jobs report is due Friday and is projected to show nonfarm payrolls rose by 160,000 in June, rebounding from 75,000 the month prior.

And here are the main moves in markets:

Stocks

• The S&P 500 Index climbed 0.8% as of 4 p.m. New York.
• The Nasdaq 100 Index rose 1.3% and the Dow added 0.4%.
• The Stoxx Europe 600 Index gained 0.8% to the highest in almost two months on the biggest rise in almost two weeks.
• The MSCI Asia Pacific Index climbed 0.8% to the highest in almost two months.

Currencies

• The Bloomberg Dollar Spot Index increased 0.5% to the highest in more than a week on the largest climb in more than two weeks.
• The euro dipped 0.8% to $1.1285.
• The Japanese yen fell 0.5% to 108.46 per dollar, the weakest in almost two weeks.

Bonds

• The yield on 10-year Treasuries gained three basis points to 2.04%.
• The two-year rate added four basis points to 1.79%.
• Germany's 10-year yield climbed three basis points to -0.36%.

Commodities

• Gold sank 1.7% to $1,389.10 an ounce, the weakest in more than a week on the biggest tumble in more than 11 weeks.
• West Texas Intermediate crude rose 0.2% to $58.55 a barrel after briefly topping $60.

--With assistance from Namitha Jagadeesh, Anchalee Worrachate and Laura Curtis.

To contact the reporters on this story: Jeremy Herron in New York at jherron8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.net

To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Jeremy Herron

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