Stocks rise on trade optimism, pound strengthens

By Caroline Valetkevitch

NEW YORK (Reuters) - Global stock indexes rose on Thursday as optimism over a resolution to the trade war between the United States and China lifted sentiment, while sterling strengthened amid hopes of a second referendum on Britain's membership in the European Union.

U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30, the Wall Street Journal reported on Thursday, citing people familiar with the internal deliberations.

U.S. stocks rallied following the report, but pared some of those gains after a Treasury spokesperson told CNBC that Mnuchin had not made any such recommendations.

"The market wants to hear some positive trade news. The way it's acted since that Christmas Eve low, the market is expecting to hear at least something incrementally positive," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

S&P 500 industrials <.SPLRCI>, which have been sensitive to trade developments, ended up 1.7 percent, among the biggest gains of S&P sectors.

Also boosting the industrials were shares of defense contractors Northrop Grumman Corp (NYSE: NOC) and Lockheed Martin Corp (NYSE: LMT), which rose after President Donald Trump unveiled a revamped U.S. missile defense strategy.

The Dow Jones Industrial Average <.DJI> rose 162.94 points, or 0.67 percent, to 24,370.1, the S&P 500 <.SPX> gained 19.86 points, or 0.76 percent, to 2,635.96 and the Nasdaq Composite <.IXIC> added 49.77 points, or 0.71 percent, to 7,084.46.

The pan-European STOXX 600 index <.STOXX> rose 0.04 percent and MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 0.40 percent.

Earlier in the day, some investors took heart from Beijing's confirmation that Chinese Vice Premier Liu He will head to the United States on Jan. 30 for more negotiations with Washington. Recent talks to resolve a protracted trade battle between the U.S. and China brought little progress.

Adding to concerns was legislation introduced by U.S. lawmakers on Wednesday that would ban the sale of U.S. chips or other components to Huawei or other Chinese telecommunications equipment makers that violate U.S. sanctions or export control laws.

STERLING

The British pound rose to a two-month high against the euro and firmed toward a two-month high against the dollar. It was trading up 0.77 percent at $1.298, its highest since Nov. 15.

Prime Minister Theresa May has been meeting lawmakers from all parties in an attempt to find a way out of an impasse over how Britain should leave the EU, after May's own plan was rejected by parliament on Tuesday.

While she has repeatedly rejected the idea of a second referendum, a vocal campaign in favor of holding a new vote has the support of some lawmakers.

U.S. Treasury yields rose with the benchmark 10-year yield reaching near three-week highs as better-than-expected economic data and hopes for progress in U.S.-China trade talks diminished safe-haven demand for government debt.

Benchmark 10-year notes last fell 6/32 in price to yield 2.7486 percent, compared with 2.729 percent late on Wednesday.

Oil prices steadied, boosted by a rebound in U.S. equities and news that OPEC sharply curtailed production in December, after earlier losses on fears about surging U.S. crude output and weakening global demand.

Brent crude oil futures slipped 14 cents to settle at $61.18 a barrel after trading as low as $60.04 intraday. U.S. crude futures fell 24 cents to settle at $52.07.

(Additional reporting by Medha Singh and Amy Caren Daniel in Bengaluru, Kate Duguid, Laila Kearney and April Joyner in New York; Editing by Steve Orlofsky and Phil Berlowitz)

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