March 4, 2019 / 3:45 PM / 8 months ago

GLOBAL MARKETS-World shares tick higher on US-China trade deal optimism

(Updates after U.S. market open, adds commentary, changes byline, previous dateline LONDON)

* Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

* WSJ reports Trump-Xi trade summit likely this month

* Dollar hits one-week high, specs increase long dollar bets

* Weak U.S. construction data dents stock enthusiasm slightly

By Sinéad Carew

NEW YORK, March 4 (Reuters) - Stock indexes around the world were higher on Monday on optimism the United States and China would reach a trade agreement as soon as this month, but U.S. indexes pared gains after weaker-than-expected construction data was released.

Trade hopes also helped push oil futures higher, along with a boost from news of OPEC output cuts.

U.S. President Donald Trump and Chinese President Xi Jinping might seal a trade deal around March 27, given progress in trade talks, the Wall Street Journal reported on Sunday.

Washington and Beijing have imposed tit-for-tat tariffs on billions of dollars worth of goods, roiling financial markets, disrupting manufacturing supply chains and shrinking U.S. farm exports.

A source briefed on the negotiations told Reuters the countries appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods.

Stock markets welcomed the news, with U.S. and European markets following Asian counterparts higher.

“We seem to be edging toward some kind of China trade deal. Secondly oil has perked up quite a bit. That’s pushing energy stocks and the market up,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

But stocks trimmed gains after U.S. Commerce Department data showed construction spending fell unexpectedly in December as investment in private and public projects dropped.

The Dow Jones Industrial Average rose 47.04 points, or 0.18 percent, to 26,073.36, the S&P 500 gained 9.56 points, or 0.34 percent, to 2,813.25 and the Nasdaq Composite added 33.69 points, or 0.44 percent, to 7,629.04.

TRADE HOPES

Despite positive reports on trade talks, Treasury yields were little changed, with the yield curve modestly flatter.

“I think the market is ignoring some of the positive news overnight,” said Gennadiy Goldberg, interest rates strategist at TD Securities.

Treasury investors have priced in some possibility of a deal already, he said, so “the market is waiting for a deal to be signed, sealed and delivered until it prices in anything more.”

Benchmark 10-year notes last rose 2/32 in price to yield 2.7477 percent, from 2.755 percent late on Friday.

The U.S. dollar was boosted by the trade reports and held earlier gains against a basket of currencies after the weak construction data.

The dollar index rose 0.21 percent, with the euro down 0.48 percent to $1.1319.

Supply from the Organization of the Petroleum Exporting Countries fell to a four-year low in February, a Reuters survey found, as top exporter Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.

U.S. crude rose 1.74 percent to $56.77 per barrel.

In Asia, China’s blue-chip index rose 1.8 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan, which has risen 10 percent so far this year, rose 0.2 percent on the day. Japan’s Nikkei strengthened 1 percent.

Safe haven gold dropped 0.7 percent to $1,284.40 an ounce as investors were more comfortable with riskier bets.

Aside from U.S.-China trade negotiations, March is seen as a crucial month for global markets. The United Kingdom is due to leave the EU on March 29 but still has no deal in place governing its exit terms. The European Central Bank is scheduled to hold a policy meeting this week.

Additional reporting by Kate Duguid and Richard Leong in New York, Ritvik Carvalho, Sujata Rao and Mike Dolan in London; editing by Larry King and David Gregorio

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