Global shares rally, bond yields rise as China fuels trade deal hopes

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Stocks in Asia tracked a US rally after China indicated it wouldn't immediately retaliate against the latest American tariff increase. Still, consumer spending remained robust, topping forecasts.

"The U.S. consumer is strong, but if they lose confidence and slow their spending that would be negative for the U.S. picture, which is now the outlier - remaining strong while the rest of the world is slowing", said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

"If you take away the trade war, you take away the worries", said Brent Schutte, chief investment strategist with Northwestern Mutual Wealth Management Co.

Nikkei 225 futures rose 0.2% in Singapore.

On Wall Street, the Dow Jones Industrial Average rose 328.53 points, or 1.26 per cent, to 26,364.63, the S&P 500 gained 37.07 points, or 1.28 per cent, to 2,925.01 and the Nasdaq Composite added 116.32 points, or 1.48 per cent, to 7,973.21.

The Stoxx Europe 600 Index rose for a second day.

Some signals analysts track point to higher yields, although no one knows when the shift is coming.

Mnuchin said he thinks it would be more effective if the U.S. Treasury intervened in conjunction with both the Federal Reserve and U.S. allies, Bloomberg said. Some investors have hedged against a possible USA rate rise by reducing holdings of long-term bonds and grabbing other fixed-income products such as private debt and structured credit. Bond prices move in the opposite direction of yields.

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Washington and Beijing are deadlocked in talks over USA complaints about China's trade surplus and industrial plans, which its trading partners say are based on stealing or pressuring companies to hand over technology. Italian stocks rose almost 2% and the country's government bonds also rallied, with yields on 10-year bonds hitting a record low.

Trump's about-turn Monday from his harsh trade rhetoric against China last week helped soothe investor sentiment this week, buoying risk assets and pulling bond yields higher briefly.

Investors were encouraged by a Chinese government statement Thursday that its penalties on US products are adequate.

Negotiators meet next month in Washington after the latest round of talks in July in Shanghai produced no sign of progress.

USA crude settled 1.67 per cent higher at US$56.71 a barrel, while Brent settled at US$61.08 a barrel, up 0.98 per cent.

The dollar fell to 106.25 Japanese yen from 106.62 yen on Thursday.

Among commodities, spot gold XAU= last fell 0.73% to trade at $1,527.60 per ounce.

The bad economic news sent US stock indexes tanking Tuesday afternoon despite Monday's rally, but stocks closed the day with gains on Wednesday.

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