Trade hopes, tech, and Turkey bolster world stocks

By Ritvik Carvalho

LONDON (Reuters) - Shares rose around the world on Friday as expectations grew that the United States and China would open new trade talks, while an interest rate hike in Turkey supported the lira and global risk appetite.

The MSCI All-Country World index (MIWD00000PUS), which tracks shares in 47 countries, was up nearly half a percent on the day after the start of trade in Europe.

Led by technology and autos stocks, the pan-European STOXX 600 index rose half a percent, set for its best weekly gains in seven weeks.

Tech stocks (SX8P) rose 0.7 percent after Apple (NASDAQ:AAPL) gained on Wall Street following Europe's close (EU).

MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) gained 1.2 percent. Australian shares (AXJO) were up 0.6 percent, Seoul's Kospi (KS11) rose 1.4 percent and Hong Kong's Hang Seng (HSI) gained 1 percent. Japan's Nikkei stock index (N225) was 1.2 percent higher.

Those rises followed gains on Wall Street Thursday, with the Dow Jones Industrial Average (DJI) ending 0.57 percent higher, the S&P 500 (SPX) gaining 0.53 percent and the Nasdaq Composite (IXIC) adding 0.75 percent.

Chinese shares fell, despite a short-lived bump from data that showed forecast-topping industrial output and retail sales data for August.

Other data showed real estate investment in the country fell in August, raising concern that a cooling property market could increase risks for China's economic outlook as the trade environment worsens.

China's benchmark Shanghai Composite index (SSEC) was down 0.2 percent and the blue-chip CSI300 index (CSI300) rose 0.2 percent.

Chinese officials welcomed an invitation from Treasury Secretary Steven Mnuchin for new talks. But U.S. President Donald Trump tempered market expectations, tweeting on Thursday that the U.S. is "under no pressure to make a deal with China".

The Trump administration is readying a final list of $200 billion worth of Chinese imports that it plans to levy tariffs on in coming days. That move would mark an escalation in the trade war and could significantly slow global growth.

Analysts at Capital Economics noted that Mnuchin had struck a deal with China in May that was scuppered days later by Trump.

"As a result, he has little credibility with Chinese policymakers," they said.

On Friday, the state-run English-language newspaper China Daily said in an editorial that China would not "surrender" to U.S. demands and "will not hesitate to take countermeasures against U.S. tariffs to safeguard China's interests".

Uncertainty around the global outlook for trade was highlighted by the European Central Bank, which on Thursday kept policy unchanged as expected and warned that risks from protectionism were growing.

Get The App

Join the millions of people who stay on top of global financial markets with Investing.com.

Download Now

'EYE-WATERING'

A sharp interest rate increase by Turkey's central bank to support a tumbling lira boosted risk appetite in emerging markets. The bank hiked its benchmark interest rate by 625 basis points, to 24 percent.

Currency crises in both Turkey and Argentina have stoked fears of contagion over the past several weeks, hammering emerging market assets from Indonesia to India to South Africa.

After rising as high as 6.1442 to the dollar, the lira TRYTOM=D3 eased slightly to 6.0768 on Friday.

Turkish lira implied volatility gauges fell to their lowest levels in more than a month on Friday, as sentiment continued to improve.

"The bold decision (by Turkey's central bank) reduces the risk that a full-scale financial crisis may unfold," wrote analysts at Rabobank in a note to clients.

"That said, it's only the first step and we remain of the view that a rate hike on its own may not prove sufficient to lead to a sustainable recovery in the lira. The central bank’s efforts must be accompanied by an implementation of constructive macro prudential policies by the administration."

The euro (EUR=) hit a two-week high, extending Thursday's gains after comments from ECB President Mario Draghi that focused on healthy domestic fundamentals, including rapid growth in employment and a rise in wages [FRX/].

The pound reached a six-week high of $1.3139, up 0.3 percent and set for its second biggest weekly rise of 2018. [GBP/]

The dollar eased 0.1 percent against the yen to 111.82 .

U.S. crude (CLc1) was 0.3 percent higher at $69.12 a barrel as Hurricane Florence approached the U.S. east coast. Brent crude (LCOc1) rose 0.6 percent to $78.62 per barrel.