Equities rebound after Trump cools China rhetoric but gold at record highs

By Sinéad Carew and Dhara Ranasinghe

NEW YORK/ LONDON (Reuters) -MSCI’s global equities gauge regained some ground on Monday after Friday’s steep sell-off as U.S. President Donald Trump softened his tone on the U.S.-China trade war, but safe-haven gold hit fresh record highs in a sign that uncertainty remained high.

On Friday Trump had threatened 100% tariffs on China from November 1 in response to China’s curbs on exports of rare earth elements. During the weekend, Beijing defended its move as a response to U.S. aggression, but stopped short of imposing new levies on U.S. products. So by Sunday, the U.S. President sounded more conciliatory posting on social media that the U.S. did not want to “hurt” China.

“Friday was a big sell off and today it’s a big rally. The Friday sell off was all about Trump threatening 100% tariffs on China. Today Trump is backing away from that,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “It was a fear trade on Friday and an elation trade today.”

On Wall Street at 10:45 a.m. (1445 GMT) the Dow Jones Industrial Average rose 480.23 points, or 1.06%, to 45,960.52, the S&P 500 rose 86.35 points, or 1.31%, to 6,638.49 and the Nasdaq Composite rose 397.43 points, or 1.78%, to 22,599.34.

MSCI’s gauge of stocks across the globe rose 7.15 points, or 0.74%, to 979.40.

Ghriskey noted that there were still some signs of skepticism in the market as equity indexes have not erased all of Friday’s losses and investors were still buying gold.

“Gold is the fear trade. Even with Trump backing away from the 100% tariffs on China there is fear out there and gold is traditionally the place to hide,” he said. Also, BofA commodities analysts said in a note on Monday that they had raised their forecast for gold to $5,000 an ounce for next year from $4,400.

Spot gold rose 2% to $4,097.57 an ounce. U.S. gold futures rose 2.89% to $4,090.80 an ounce.

The pan-European STOXX 600 <.stoxx> index rose 0.33% although France remained in the spotlight with reappointed prime minister Sebastien Lecornu facing pressure to get a budget deal across the line.

In currencies, the dollar index , which measures the greenback against a basket of currencies including the yen and the euro, rose 0.26% to 99.31.

The euro was down 0.47% at $1.1563 while against the Japanese yen , the dollar strengthened 0.85% to 152.43.

Japanese markets have had their own problems with the ascension of new LDP leader Sanae Takaichi to prime minister now in doubt, contributing to a sharp rebound in the yen and a 5% dive in Nikkei futures on Friday. Japan’s Nikkei was closed on Monday for a holiday.