By Caroline Valetkevitch
NEW YORK (Reuters) – Major stock indexes rallied, the dollar gained against the euro and other currencies while safe-haven gold dropped on Wednesday as investors grew optimistic about a possible de-escalation in the trade war between the U.S. and China.
A source familiar with the matter said U.S. President Donald Trump’s administration would look at lowering tariffs on imported Chinese goods pending talks with Beijing.
The source’s comments followed a Wall Street Journal report, citing people familiar with the matter, that the White House is considering cutting its tariffs on Chinese imports in a bid to defuse economically damaging tensions with Beijing.
Adding to the upbeat tone, Trump late Tuesday backed off from threats to fire Federal Reserve Chair Jerome Powell.
“There seems to be some light at the end of the tunnel here in terms of the trade war,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Trump’s multi-front tariff war has roiled markets in recent weeks, while his criticism of Powell in recent days has added to investor worries about U.S. assets.
Some earnings news in the U.S. and elsewhere also buoyed stocks on Wednesday. Boeing shares were up 5.9% after the company reported a smaller-than-expected quarterly loss.
The Dow Jones Industrial Average rose 685.41 points, or 1.76%, to 39,877.68; the S&P 500 rose 113.44 points, or 2.16%, to 5,401.20; and the Nasdaq Composite rose 500.27 points, or 3.07%, to 16,800.68.
Shares of Tesla also jumped even though the company reported results that missed analyst forecasts. Tesla boss Elon Musk said on a call with analysts he would significantly reduce his involvement in work at the U.S. Department of Government Efficiency from next month to focus more on his many companies.
MSCI’s gauge of stocks around the world rose 14.64 points, or 1.84%, to 810.90. The pan-European STOXX 600 index rose 1.67%.
After hitting record highs in recent session, spot gold was last down 3.09% at $3,276.93 an ounce.
The euro was last down 0.36% against the dollar at $1.1379. Against the Japanese yen, the dollar strengthened 0.49% to 142.28.
U.S. Treasury yields declined after the U.S. administration’s signal of a potential respite in the U.S.-China trade war and Trump’s softening stance on Powell.
Investors have been worried that White House pressure to cut interest rates would risk fuelling inflation just as Trump’s tariffs jack up prices.
The yield on benchmark U.S. 10-year notes fell 5.3 basis points to 4.336%, from 4.389% late on Tuesday.
Oil was lower. U.S. crude fell 2.97% to $61.78 a barrel.
(Additional reporting by Amanda Cooper in London and Wayne Cole in Sydney and Purvi Agarwal; editing by Tom Hogue, Bernadette Baum, Gareth Jones and Mark Heinrich)
