Equities rise with dollar, bond yields on trade optimism after US-UK deal

By Sinéad Carew and Marc Jones

NEW YORK/LONDON (Reuters) -Global equities were slightly higher on Thursday, with Wall Street outperforming, while the dollar and Treasury yields also gained after the United States and United Kingdom outlined a trade deal, fueling hopes for compromises with other countries.

Cryptocurrencies were also bolstered by the U.S.-UK trade agreement, which was the first pact announced in the month since U.S. President Donald Trump started a 90-day pause on trade tariffs to give room for negotiations.

The deal, unveiled by Trump and British Prime Minister Keir Starmer, leaves in place a 10% tariff on goods imported from the UK but lowers prohibitive U.S. duties on UK car exports. Britain agreed to lower its tariffs to 1.8% from 5.1% and provide greater access to U.S. goods.

Investors were encouraged as they waited for planned talks between U.S. and Chinese officials in Switzerland over the weekend, which are seen as a first step in dialing down the damaging trade war between the world’s two biggest economies.

“There’s optimism growing around trade deals, not only this UK deal that was announced today, but around what might happen over the weekend,” said Mona Mahajan, head of investment strategy at Edward Jones, adding that the S&P 500 has risen sharply since the lows of April.

Wall Street indexes pulled back from their session highs in the last hour of trading but still finished the day with gains.

The Dow Jones Industrial Average rose 254.48 points, or 0.62%, to 41,368.45, the S&P 500 rose 32.66 points, or 0.58%, to 5,663.94 and the Nasdaq Composite rose 189.98 points, or 1.07%, to 17,928.14.

The CBOE volatility index, also known as Wall Street’s fear gauge, registered its lowest closing level since April 2, also a bullish signal.

MSCI’s gauge of stocks across the globe rose 0.83 points, or 0.10%, to 844.86. Earlier the pan-European STOXX 600 index closed up 0.4%.

The trade news followed the latest U.S. central bank policy update on Wednesday, when the U.S. Federal Reserve took a wait-and-see stance on interest rates and warned that risks of higher inflation and higher unemployment had risen as it navigates uncertainty caused by Trump’s trade policies.

In government bonds, U.S. Treasury yields touched multi-week highs, as the U.S.-UK deal spurred optimism for agreements with other countries in the coming weeks and months.

“If tariff threats start to recede and if this UK deal is the beginning of a range of deals coming up, then you would think (Federal Reserve Chair Jerome) Powell wouldn’t have to cut rates very much at all,” John Velis, macro strategist for the Americas, at BNY in New York.

The yield on benchmark U.S. 10-year notes rose 11.3 basis points to 4.388%, from 4.275% late on Wednesday. The 30-year bond yield rose 8.1 basis points to 4.853%.

The 2-year note yield, which typically moves in step with Fed interest rate policy expectations, rose 9.8 basis points to 3.891%, from 3.793% late on Wednesday.

In currencies, the U.S. dollar gained against major currencies with market nerves calmed by the U.S.-UK agreement. But Sterling reversed earlier gains which had followed an interest rate cut from the Bank of England.

The pound was last down 0.42% at $1.3239 while the dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.77% to 100.66.

The euro was down 0.67% at $1.1223.

Against the Japanese yen, the dollar strengthened 1.46% to 145.92 and against the Swiss franc, the dollar strengthened 1.01% to 0.832.

Sweden and Norway’s central banks hinted they could also cut rates later in the year. The Swedish crown weakened 0.77% versus the dollar to 9.744.

In crypto, bitcoin surpassed $100,000 for the first time since early February, rising 4.93% to $101,544.25. Ethereum rose 17.79% to $2,118.37.

Crude futures rose, buoyed by hopes of a breakthrough in trade talks between the United States and China, the world’s two largest oil consumers.

U.S. crude settled up 3.17%, or $1.84 at $59.91 a barrel while Brent settled at $62.84 per barrel, up 2.81%, or $1.72, erasing the previous day’s losses.

Demand for safe-haven gold weakened as the UK-U.S. deal raised hopes for deals with other countries.

Spot gold fell 1.73% to $3,306.00 an ounce. U.S. gold futures fell 2.35% to $3,301.90 an ounce.

(Reporting by Sinéad Carew, Gertrude Chavez-Dreyfuss, Marc Jones; Editing by Chizu Nomiyama, Will Dunham, Nia Williams and Diane Craft)