By Stephen Culp
NEW YORK (Reuters) - U.S. stocks added to their gains on Tuesday following news of potential progress in U.S.-China trade negotiations, while the pound fell after Brexit hard-liner Boris Johnson won the leadership of Britain's Conservative Party, clearing the way for him to become prime minister.
A host of strong earnings gave U.S. stock indexes an early boost, with Dow components Coca-Cola Co (N:KO) and United Technologies Corp (N:UTX) both beating second-quarter earnings estimates.
Stocks extended their gains on reports that U.S. negotiators were headed to China on Monday for face-to-face trade talks, a sign of potential progress in the two countries' prolonged, acrimonious tariff spat.
"Company reports have been very good on the whole, but revenue numbers have missed the mark and on conference calls they're highlighting trade as an issue," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
"Trade has been holding down stocks. If we're able to resolve it, you'll see a pickup in global growth."
U.S.-China trade tensions, along with the prospect of Britain exiting the European Union, or Brexit, without a deal, were cited by the International Monetary Fund as reasons it cut its global growth forecast through 2020.
The Dow Jones Industrial Average (DJI) rose 177.29 points, or 0.65%, to 27,349.19, the S&P 500 (SPX) gained 20.44 points, or 0.68%, to 3,005.47 and the Nasdaq Composite (IXIC) added 47.27 points, or 0.58%, to 8,251.40.
The European STOXX 600 benchmark rose about 1%, helped by a 6% surge in automakers and growing certainties of policy easing from the European Central Bank and the U.S. Federal Reserve.
The pan-European STOXX 600 index (STOXX) rose 0.98% and MSCI's gauge of stocks across the globe (MIWD00000PUS) gained 0.48%.
The dollar advanced to a near five-week high against a basket of world currencies, on the heels of a congressional deal to extend the U.S. debt limit for two years, easing fears of a government default.
But the British pound lost ground after Johnson, who has promised to lead Britain out of the European Union with or without a deal by the end of October, won the Conservative Party leadership and will replace Theresa May as the country's prime minister.
"It's going to take some time before we can assess (Johnson's) negotiating skills and what type of deal he's going to push for," added Nolte.
The dollar index (DXY) rose 0.49%, with the euro (EUR=) down 0.55% to $1.1146.
The pound
Crude prices rose late in the session following reports that the United States may have shot down a second Iranian drone, adding to escalating Middle East tensions.
U.S. crude oil futures settled at $56.77 per barrel, up 1%, while Brent Crude futures settled at $63.83 per barrel, up 0.9% on the day.
U.S. Treasury yields inched higher on renewed trade optimism, and as market participants eyed expected interest rate cuts from ECB and Federal Reserve.
"The dollar and Treasury yields quickly picked up as it became a risk-on afternoon," added Nolte.
Benchmark 10-year notes (US10YT=RR) last fell 9/32 in price to yield 2.0724%, from 2.043% late on Monday.
The 30-year bond (US30YT=RR) last fell 26/32 in price to yield 2.6069%, from 2.57% late on Monday.
Spot gold prices