Wall Street lifts as US-China trade tensions ease

Stocks on Wall Street surged as reduced US-China trade tensions spurred demand for industrial companies.

The Dow Jones Industrial Average jumped 298.20 points, or 1.2%, to 25,013.29, closing above 25,000 for the first time since March 16.

The S&P 500 advanced 0.7% to 2733.01 and the Nasdaq Composite rose 0.5% to 7374.04.

Earlier, Treasury Secretary Steven Mnuchin said the US would suspend proposed tariffs worth $US150 billion on Chinese imports and that China would hold its retaliatory tariffs on $US50b in US goods.

Though tensions abated, the two countries haven’t reached a final resolution yet.

Shares of industrial exporting companies were the biggest winners in the S&P 500, adding 1.5%. In the Dow, Boeing rose 3.6% and Caterpillar 2.1%.

Trading sideways
While the global economy remains robust and first-quarter earnings have been strong, stock markets have mostly traded sideways this year because many investors have started to fear the pace of the expansion has already peaked.

“It’s not in anyone’s interests to have severe escalation,” says Caroline Simmons, deputy head of UK investment at UBS Wealth Management, who believes investors won’t ultimately put too much weight on geopolitical spats.

“It’s noise; in the midterm, it’s going to come down to what’s being delivered growth-wise and earnings-wise.”

In corporate news, General Electric added 1.9% after it agreed to merge its railroad business with Wabtec, an equipment maker for transit systems and freight railroads, in a $US11b deal. Wabtee shares rose 3.5%.

Bond yields rise
Meanwhile, investors are closely watching potential risks to stocks such as US Treasury yields.

If government bond yields rise too high, as bond prices fall, some investors may choose to hold government debt rather than equities, threatening any stock rally.

US government bonds were little changed ahead of the scheduled sale of $US115b of short- and intermediate-term notes.

The yield on the benchmark 10-year Treasury note traded at 3.063% from 3.067% on Friday.

Later this week, the Federal Reserve will release the minutes of its May policy meeting, which will shed further light on how fast officials are likely to raise rates in reaction to inflation risks.

Oil prices were mixed as investors weighed further crude supply disruptions in Venezuela against the prospect that the European Union will help keep Iran’s oil flowing.

Increased pressure on Iran
The US has stepped up its demands on Iran’s military involvement in the Middle East in the wake of ending the nuclear deal that will renew sanctions.

In a speech, Secretary of State Mike Pompeo said any new deal would require Iran to withdraw all of its forces from Syria, end its support for militant groups like Hezbollah in Lebanon, stop sending arms to the Houthi militia in Yemen, release all US citizens, and cease its threats to destroy Israel.

“Relief from sanctions will come only when we see tangible, demonstrated, and sustained shifts in Tehran’s policies,” he said.

US crude futures rose 0.5%, to $US71.61 a barrel. Brent, the global benchmark, fell 0.2%, to $US78.35.

The Stoxx Europe 600 gained 0.3%. The UK’s FTSE 100 climbed 1.0% to an all-time high.

France’s CAC 40 rose 0.4%, while Italy’s FTSE MIB stock-market index slid a further 1.5% on concerns about antiestablishment parties’ advances in forming a new government.  Germany closed for a holiday.

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