Investors hope fresh talks will avert an all-out US-China trade war

London (AFP) - Stock markets rose Friday as investors tracked developments in the drawn-out China-US trade talks, with glimmers of hope that both sides will avoid a damaging escalation of trade conflicts, dealers said.

There was “optimism lingering that the US and China could start another round of trade talks”, said analysts at Charles Schwab.

At the end of a week dominated by monetary policy decisions, there was also relief that central banks in emerging economies were actively helping their currencies, after unexpectedly sizeable interest rate increases in Turkey and Russia.

After a tumultuous start to the month, investors finally had something to smile about after US Treasury Secretary Steven Mnuchin on Thursday invited Chinese officials for fresh talks to avert an all-out trade war.

- Breathing space -

The news provided some much-needed support, as did data showing US consumer price inflation slid in August, easing pressure on the Federal Reserve to tighten borrowing costs.

Wall Street stocks rose modestly following a mixed retail sales report and as investors eyed increasing US Treasury bond yields, and key European markets were solidly up at the closing bell.

While the US central bank is expected to lift rates next month, the figures lower the chances of another such move before January – providing support to equities on Wall Street.

It also gave some breathing space to emerging markets, which have been battered in recent weeks by fears of contagion from crises in Turkey, Argentina and South Africa.

“Hope springs eternal for emerging markets anytime the US dollar weakens,” said Stephen Innes, head of Asia-Pacific trading at Oanda trading group.

The dollar, however, recovered throughout Friday’s session.

On trade, Hannah Anderson, global market strategist at JP Morgan Asset Management, warned against being too hopeful, with the US still considering imposing tariffs on $200 billion of Chinese imports.

“Markets need to separate trade rhetoric and trade actions,” she said.

- Rhetoric -

“While heated rhetoric may contribute to the shifting investor expectations we have seen this week, there has been no fundamental change in the state of the US-China trade dispute,” Anderson added.

The Chinese economy meanwhile revealed fresh signs of softness Friday, with data showing the pace of investment slowing to record lows, while retail spending and industrial production stabilised.

Beijing faces a delicate balancing act, aiming to shift its growth driver away from investment and exports towards personal consumption, while at the same time battling a mountain of debt.

- Key figures around 1540 GMT -

London - FTSE 100: UP 0.3 percent at 7,304.04 points (close)

Frankfurt - DAX 30: UP 0.6 percent at 12,124.33 (close)

Paris - CAC 40: UP 0.5 percent at 5,352.57 (close)

EURO STOXX 50: UP 0.3 percent at 3,344.63

New York - Dow Jones: UP 0.2 percent at 26,198.68

Tokyo - Nikkei 225: UP 1.2 percent at 23,094.67 (close)

Hong Kong - Hang Seng: UP 1.0 percent at 27,286.41 (close)

Shanghai - Composite: DOWN 0.2 percent at 2,681.64 (close)

Euro/dollar: DOWN at $1.1660 from $1.1689 at 2100 GMT

Pound/dollar: DOWN at $1.3080 from $1.3105

Dollar/yen: UP at 112.16 yen from 111.94 yen

Oil - Brent Crude: DOWN 22 cents at $77.96 per barrel

Oil - West Texas Intermediate: UP 2 cents at $68.61 per barrel