By Laila Kearney
NEW YORK (Reuters) – Rising hopes that the United States and China could call a trade war ceasefire at the upcoming G20 summit boosted global stocks on Wednesday, but gains were held in check as investors looked ahead to a speech by Federal Reserve Chairman Jerome Powell.
Meanwhile, safe-haven assets came under pressure with the gain in equities, and sterling rose before the Bank of England released its Brexit analysis.
Despite U.S. President Donald Trump’s tough remarks on the trade dispute ahead of Saturday’s meeting with Chinese President Xi Jinping, markets focused on comments by White House economic adviser Larry Kudlow, who indicated the two countries could call a truce.
“Any hint that the China-U.S. trade dispute could be resolved could make a pick-up in global growth,” said Kim Forrest, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.
Wall Street opened higher on hopes for a thaw in U.S.-China relations, with industrial stocks, which have borne the brunt of the protracted trade war, becoming one of the biggest gainers.
The Dow Jones Industrial Average rose 197.19 points, or 0.8 percent, to 24,945.92, the S&P 500 gained 6.49 points, or 0.24 percent, to 2,688.66 and the Nasdaq Composite added 15.35 points, or 0.22 percent, to 7,098.05.
The pan-European STOXX 600 index rose 0.04 percent and MSCI’s gauge of stocks across the globe gained 0.08 percent.
Still, lingering caution that the two sides would leave the summit without an agreement capped gains, especially in Europe, which was hit on Tuesday by a report that Trump may soon decide about new taxes on imported cars.
“If they come out with nothing this weekend, it’s going to be very bad,” said Bernd Berg, global macro strategist at Swiss-based Woodman Asset Management.
A rapprochement is seen as crucial, given that world growth and trade are already showing signs of an alarming slowdown.
Graphic – World Trade Organization (WTO) outlook: https://tmsnrt.rs/2RlhEOc
Investors were also eyeing a speech by Federal Reserve Chairman Jerome Powell for insight into the path of interest rate hikes.
Powell’s speech at 12 p.m. EST (1700 GMT) will be evaluated for any new indications of caution as global growth slows and as the U.S. central bank comes under renewed criticism from Trump for raising interest rates.
Uncertainty over global trade as well as Brexit and Italy’s conflict with the European Union, have supported the U.S. dollar, which hit a two-week high against a basket of currencies.
The dollar steadied ahead of Powell’s speech, with the dollar index rising 0.1 percent.
The euro was down 0.05 percent to $1.1282.
Sterling, meanwhile, gained as investors positioned themselves before the Bank of England’s analysis of Britain’s exit from the European Union.
U.S. government bond yields were up modestly as traders held back from making big moves before the Fed chairman’s speech.
Yields at the short end of the curve were up between 1 and 2 basis points, with the 10-year note yield up 1.3 basis points, and the 30-year yield up about a point.
Brent oil futures fell as Saudi Arabia dampened expectations of production cuts by the OPEC producer club and inventories of crude remain high
GRAPHIC- Brent crude oil price slumps of 2008, 2014/2015 & 2018 in percent: https://tmsnrt.rs/2RiWkJ1
GRAPHIC- Global assets in 2018: http://tmsnrt.rs/2jvdmXl
GRAPHIC- World FX rates in 2018: http://tmsnrt.rs/2egbfVh
GRAPHIC- Emerging markets in 2018: http://tmsnrt.rs/2ihRugV
GRAPHIC- MSCI All Country World Index Market Cap: http://tmsnrt.rs/2EmTD6j
GRAPHIC- The rolling bear market: https://tmsnrt.rs/2QCzyvm
(Additional reporting by Sujata Rao, Swati Pandey in Sydney, Amy Caren Daniel, Karen Brettell and Kate Duguid in New York and Hideyuki Sano in Tokyo; editing by Gareth Jones and Nick Zieminski)