NEW YORK (Reuters) - World equity markets rose on Friday as optimism around trade and benign U.S. inflation boosted investor sentiment, while crude oil retreated on news of weaker U.S. factory activity.
On Thursday, White House economic adviser Larry Kudlow called progress in the trade negotiations between the United States and China “fantastic” and said the countries were “heading toward a remarkable, historic deal.”
Additionally, Bloomberg reported that a summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign a final deal could happen as soon as mid-March.
“They may be moving toward a trade deal, and the market is anticipating that and getting ahead of it,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.
“That doesn’t mean it will gin up the global economy as the market is hoping for,” he added.
A slew of surveys has highlighted how much manufacturers are suffering worldwide, particularly those exposed to China’s slowdown, and added weight to expectations that policy tightening from central banks is pretty much over.
A private survey showed China’s factory activity contracted for a third straight month in February, though at a slower pace, helping to lift global equities.
MSCI’s gauge of stocks across the globe gained 0.4 percent.
On Wall Street, the Dow Jones Industrial Average rose 110.32 points, or 0.43 percent, to 26,026.32, the S&P 500 gained 19.2 points, or 0.69 percent, to 2,803.69 and the Nasdaq Composite added 62.82 points, or 0.83 percent, to 7,595.35.
A U.S. Commerce Department report showed tame inflation pressures and U.S. personal income falling for the first time in more than three years in January.
The modest inflation lends support to the Federal Reserve’s pledge to be patient on hiking U.S. interest rates, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
“All of this helps toward a positive underpinning in the market,” she said.
Oil prices reversed course to fall 2 percent as bearish U.S. manufacturing data stoked concerns over global energy demand.
The ISM manufacturing activity index in February sank to the lowest since November 2016 and was below expectations.
U.S. West Texas Intermediate futures settled down $1.42, or 2.48 percent, to $55.80 a barrel. Global benchmark Brent crude futures settled $1.24 lower to $65.07 a barrel, a 1.87 percent drop.
The dollar rose, hitting 10-week-highs against the yen, as risk appetite improved amid a more upbeat outlook on some of the world’s largest economies and on the prospect of a U.S.-China trade deal.
The dollar was up 0.5 percent against the Japanese yen after hitting a 10-week high.
The euro was little changed against the dollar at $1.1365.
The dollar index, which measures the greenback against a basket of six currencies, rose 0.31 percent.
U.S. Treasury yields were higher as investors sold off safe-haven assets on hopes for a trade deal with China and shrugged off economic data whose release was delayed by the government shutdown.
Benchmark 10-year Treasury notes last fell 15/32 in price to yield 2.7658 percent, from 2.711 percent late on Thursday.
(GRAPHIC: MSCI Asia USD indexes - tmsnrt.rs/2UcdKZj)
Reporting by Herbert Lash and April Joyner, additional reporting by Caroline Valetkevitch, Sinéad Carew, and Gertrude Chavez-Dreyfuss in New York; Editing by James Dalgleish, Dan Grebler and Sonya Hepinstall