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US, Europe equities hit record highs as trade fears abate; Treasurys fall


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US, Europe equities hit record highs as trade fears abate; Treasurys fall

➤ US, China avert Dec. 15 tariffs with phase-one agreement.

➤ US trade rep: China to purchase $40B-$50B in farm purchases annually over 2 years.

➤ UK stocks rise the most in 3+ years, as Johnson prepares to appoint cabinet.

➤ Gold flat, as safe-haven Japanese yen dips.

Wall Street hit a record high, and so did European bourses, as a preliminary trade agreement between the U.S. and China lifted the sentiment.

The S&P 500 and Nasdaq 100 gained 0.7% and 0.8%, respectively, around 9:32 a.m. ET.

The U.S. and China averted the tariffs scheduled to take effect on each other's goods Dec. 15 after both parties agreed to the text of a phase-one deal Dec. 13. U.S. Trade Representative Robert Lighthizer said the partial pact may be signed in January 2020 and that it includes a Chinese pledge to purchase $40 billion to $50 billion of U.S. farm products annually over the next two years.

The U.S. will also lower the tariff rate imposed in September on roughly $120 billion of Chinese goods to 7.5% from 15% as part of the preliminary agreement, which is yet to be translated.

Separately, the U.S. private sector grew at a faster pace at the end of 2019 than last month, to a five-month high as service sector growth accelerated.

European shares also hit an all-time high, with the pan-European Stoxx 600 trading 1.4% higher. The FTSE 100 jumped 2.45%, having previously increased 2.6%, which was the largest rise in more than three years.

U.K. Prime Minister Boris Johnson was due to appoint his cabinet following a victory in the Dec. 12 snap poll.

Germany's DAX rose 0.8% and France's CAC 40 advanced 1.2%.

Asian equities were mixed, with Hong Kong's Hang Seng and Japan's Nikkei's 225 down 0.7% and 0.3%, respectively. Japan's latest purchasing managers index data showed that business activity failed to improve in December, putting the economy at risk of slipping into contraction in the fourth quarter.

Meanwhile, the Shanghai SE Composite rose 0.6% amid upbeat macroeconomic data, with growth in industrial output and retail sales surpassing estimates.

In the bond markets, the yield on 10-year Treasurys added 3 basis points to 1.858%, while that on German Bunds with the same maturity dipped 1 basis point to negative 0.294%.

In currencies, the dollar index lost 0.2% to 96.9860.

Sterling gained 0.1% to 1.3348. The U.K. composite output index plunged to a 41-month low in December as manufacturing production registered its steepest fall since July 2012.

The euro gained 0.3% versus the dollar. IHS Markit data showed that the eurozone's economic growth nearly stalled for the third consecutive month in December, concluding the fourth quarter with the weakest growth in six years.

Elsewhere, the safe-haven Japanese yen dipped 0.1%.

Brent crude oil added 0.4% higher to $65.45 per barrel on the ICE Futures Exchange. Gold was little changed at $1,482.00 per ounce.

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The day ahead:

4 p.m. ET — U.S. Treasury international capital