Stocks in Japan, Korea and Australia posted modest losses while Hong Kong futures pointed lower. Earlier, the S&P 500 Index closed higher on the trade news, while the dollar weakened and oil gained. In the Treasury market, three-year yields climbed above five-year ones, showing that traders are pricing in the end of the Federal Reserve’s interest-rate hike campaign. Ten-year yields steadied below 3 percent.

Investors are mulling the prospects for a year-end equity rally, with prospects for renewed U.S.-China trade talks calming tensions after a tumultuous period for risk assets. Treasury Secretary Steven Mnuchin said he’s hopeful for a “real agreement” that includes structural changes in China’s economic policies, while White House economic adviser Larry Kudlow said the two countries are “pretty close” to an agreement on stopping intellectual property theft.

“It’s easy to see the trade deal as a half empty — that it’s just a postponement and that they’ll work together but that there really isn’t any kind of resolution,” said Jeff Kleintop, chief global investment strategist at Schwab Center for Financial Research. “But I think you can see it as a half glass full. ”

Concerns remain about the impact of Fed tightening against a backdrop of slowing global growth. While the more closely watched part of the yield curve — the gap between two-year and 10-year yields — remains upwardly sloped, it flattened to just 15 basis points Monday. With yield-curve inversions having been a reliable indicator of past recessions, the move casts a shadow over the outlook for 2019.

Elsewhere, oil extended Monday’s surge as Saudi Arabia and Russia continued their cooperation pact. The pound erased a gain as the threat of a vote to bring down British Prime Minister Theresa May’s government looms should Parliament reject her Brexit deal.
Terminal subscribers can read our Markets Live blog.

Coming Up

U.S. financial markets are set to close Wednesday for a national day of mourning to honor former President George H.W. Bush. Fed Chairman Jerome Powell’s testimony to Congress scheduled for Wednesday has been canceled. Friday brings the U.S. monthly employment report for November. China November trade data are due on Saturday.

These are the main moves in markets:

Stocks
The MSCI Asia Pacific Index fell 0.1 percent at 9:05 a.m. Tokyo time. Japan’s Topix Index fell 0.2 percent. Hang Seng futures fell 0.6 percent overnight. The S&P/ASX 200 fell 0.2 percent. The S&P 500 gained 1.1 percent while the Nasdaq Composite Index rose 1.5 percent. The Stoxx Europe 600 rose 1 percent.

Currencies
The Bloomberg Dollar Spot Index fell 0.1 percent. The euro was little changed at $1.1353. The British pound was at $1.2725. The Japanese yen was flat at 113.59 per dollar.

Bonds
The yield on benchmark 10-year Treasuries was little changed at 2.98 percent.

Commodities
West Texas Intermediate crude rose 0.3 percent to $53.26 a barrel. Gold was flat at $1,230.80. LME copper climbed 1.6 percent to $6,295 per metric ton Monday

To contact the reporter on this story: Cormac Mullen in Tokyo at cmullen9@bloomberg.net To contact the editor responsible for this story: Christopher Anstey at canstey@bloomberg.net

copyright
© 2018 Bloomberg L.P