(Bloomberg) — U.S. index futures and European equities rose as talks between the US and China on removing some trade tariffs boosted optimism for an easing of inflation. The dollar found a bid at the European open.
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Contracts on the S&P 500 and Nasdaq 100 indexes advanced at least 0.3% each as US markets were set to return after Independence Day holiday. European equity traders turned their attention to corporate earnings, sending the Stoxx 600 higher for a second day. Treasuries caught up with Monday’s global bond selloff, with the two-year rate jumping 10 basis points.
US and Chinese officials discussed economic sanctions and tariffs amid reports Washington may roll back some of the trade levies imposed by former President Donald Trump. That came as a relief for global investors fretting over the possibility of a US recession coupled with monetary tightening to combat elevated inflation.
“Markets are likely to react positively on a knee-jerk because, at this point, we are hungry for any signs of positive news,” said Charu Chanana, senior markets strategist at Saxo Capital Markets Pte. “But we don’t see the move impacting the global growth and inflation dynamics in a significant way.”
US markets reopen Tuesday after capping 11 declines in the past 13 weeks as a first-quarter contraction in the world’s largest economy boosted the prospects of a recession. At the same time, consumer prices are far from peaking with inflation surging to 8.6% in May that left little room for the Federal Reserve to slow monetary tightening.
Short-end rates led a selloff in Treasuries Tuesday, with the two-year yield jumping to 2.93%. However, the news of US-China talks perked up sentiment in the equity markets, sending September futures on US indexes higher. In Europe, stocks tied to economic revival, including real estate and travel, led a rally.
The dollar erased losses and traded 0.2% higher. The euro and the British pound lost 0.3% each.
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