Stocks advance to end first half as G20 in focus

NEW YORK (Reuters) – A gauge of global stocks climbed on Friday in advance of a meeting on trade between U.S. President Donald Trump and Chinese President Xi Jinping, as global equities notched their best first half since 1997.

Trump and Xi will meet during a Group of 20 summit this weekend in Osaka, Japan, for talks that could help resolve a yearlong trade war between China and the United States, as signs of its dampening effect on global growth have become more prevalent.

“Everybody’s anticipating a positive meeting between Trump and President Xi,” said Denis (Sandy) Villere, portfolio manager at Villere & Co in New Orleans.

“It’s priced in as if it’s a foregone conclusion. It’s making us a little nervous that the market’s already baked in all that good news.”

Economic data on Friday showed U.S. consumer spending increased moderately in May and prices rose slightly, pointing to slowing economic growth and benign inflation pressures, which could give the Federal Reserve enough leeway to cut interest rates in July.

Wall Street rose, buoyed by financial shares in following the results of the U.S. Federal Reserve’s “stress tests,” although each of the major indexes snapped a three-week winning streak. The S&P 500 had its best June performance since 1955 while the Dow marked its best June since 1938. Graphic: Global assets in 2019, click tmsnrt.rs/2jvdmXl

The Dow Jones Industrial Average rose 72.84 points, or 0.27%, to 26,599.42, the S&P 500 gained 16.53 points, or 0.57%, to 2,941.45 and the Nasdaq Composite added 38.49 points, or 0.48%, to 8,006.24.

Banking shares also helped European indexes move higher ahead of the meeting, with Germany’s DAX leading the way with a gain of more than 1% thanks to gains in Deutsche Bank AG .

The pan-European STOXX 600 index rose 0.70% to notch its best first half since 1998 and MSCI’s gauge of stocks across the globe gained 0.44%.

MSCI’s index scored its best month since January, gaining more than 6% in June as equities rallied after major central banks around the globe pivoted toward easier monetary policy stances. Graphic: Global currencies vs. dollar, click tmsnrt.rs/2egbfVh

That shift came as trade negotiations between the United States and China broke down earlier this year. Now markets are betting that an interest rate cut by the Federal Reserve of at least a quarter of a percentage point is a virtual certainty as early as the next policy meeting in July, according to CME’s FedWatch tool.

On Thursday, China’s central bank pledged to support a slowing economy, before the release of data that is expected to show China’s factory activity slowed for a second consecutive month in June.

The dollar index fell 0.01% against a basket of major currencies and was set to turn in its weakest monthly performance since January 2018 as anticipation of a Fed rate cut has pushed the index down about 1.7% this month.

Graphic: MSCI All Country World Index Market Cap, click tmsnrt.rs/2EmTD6j