US-China trade talks boost global stocks

Futures tied to the S&P 500 rise, suggesting the benchmark index may advance to a fresh record

Global stocks rose Tuesday as investors cheered trade talks among senior U.S. and Chinese officials following weeks of escalating tensions between the world’s two largest economies.

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Futures tied to the S&P 500 rose 0.5%, suggesting the benchmark index will advance to a fresh record after the opening bell in New York. The S&P 500 climbed for a third consecutive trading day Monday, boosted by investors’ optimism about a potential treatment for coronavirus.

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Sentiment was further lifted after senior U.S. and Chinese officials said they were committed to carrying out the phase-one trade accord signed in January. A videoconference late Monday brought together U.S. Trade Rep. Robert Lighthizer, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He for a formal review of the deal.

Trade tensions between the U.S. and China buffeted markets last year before the world’s two largest economies struck the phase-one deal in January. As relations soured over Covid-19, technology and the national-security law imposed by China on Hong Kong, investors worried that new frictions to trade and commerce would hurt the global economy.

“Of course it’s positive when you have that kind of newsflow—it’s reassuring,” said Nadège Dufossé, head of cross-asset strategy at asset manager Candriam. “It’s not in the U.S. and China’s interest to have a new trade war.”

Still, Ms. Dufossé said she would not make investments based on Monday’s review of the deal.

“It’s positive in the short term, but it can change very rapidly,” she said, adding that President Trump might seek to campaign for re-election by being tough on China. “On the technology front, I think frictions are here to stay.”

Overseas stock markets were broadly higher. The regional Stoxx Europe 600 gained 0.3%, led by shares of banks and travel-and-leisure companies, which are sensitive to perceptions of the outlook for economic growth.

In Asia, Japan’s Nikkei 225 rose 1.4% by the close. China’s Shanghai Composite Index and Hong Kong’s Hang Seng both posted muted losses.

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Investors will parse data on sales of new homes at 10 a.m. ET for a steer on the health of the housing market, which has been a bright spot in the U.S. economy. Sales are expected to have climbed in July, underscoring how low interest rates and a desire for more space to work from home have bolstered demand.

In another sign of investor optimism, yields on 10-year Treasury notes ticked up to 0.678%, from 0.645% Monday. Yields rise as bond prices fall. The WSJ Dollar Index, which tracks the dollar against a group of other currencies, slipped 0.1%.

Gasoline futures rose 0.7% to $1.27 a gallon as two storms barreled toward Louisiana and Texas. More than a third of the U.S.’s operable oil refineries are in the Gulf Coast region, according to the Energy Information Administration, prompting concerns that the storms could crimp gasoline production.

Tropical Storm Laura is poised to strengthen into a hurricane Tuesday as it sweeps across the Gulf of Mexico, according to the National Oceanic and Atmospheric Administration. Marco weakened and was downgraded to a tropical depression on Monday.

Write to Joe Wallace at Joe.Wallace@wsj.com