Stocks rise as US stimulus seems close

LONDON — Stock markets on both sides of the Atlantic climbed on Wednesday after a mixed Asian showing, with hopeful traders tracking talks on a key US stimulus package. 

Uncertainty about the global economic outlook caused by the coronavirus pandemic, meanwhile, caused investors to hedge their bets, helping gold to fresh highs day after the haven asset broke through $2,000 per ounce for the first time.

"Stocks are back in rally mode," said Chris Beauchamp, chief market analyst at the IG trading group.

"That both equities and the supreme risk-off asset [gold] are moving higher just shows how conflicted investors are — they can't avoid being tempted by equities, but they can also read the unending stories of bankruptcies," he added.

Among upbeat news in Europe were strong rebounds for the UK services sector and sales of new cars after both plummeted during the country's lockdown.

The IHS Markit/CIPS Services purchasing managers' index (PMI) for Britain rose to 56.5 in July from 47.1 in June.

A reading above 50 indicates an expansion, and July's rebound indicated "the very early stages of recovery... from an exceptionally low base", said Tim Moore, economics director at IHS Markit.

 'Bulls engaged' 

Most of the markets' focus was on the United States, where Republicans and Democrats are negotiating over a fresh economic rescue package, with some reports suggesting decent progress.

"The political wrangling has been going on for over one week, but dealers are still a little optimistic that an agreement will be reached," said David Madden at CMC Markets. 

"It was reported that talks have been productive, so that has been keeping the bulls engaged."

But ongoing China-US tensions prevented traders from getting too invested in equities.

"Rising trade tensions between the US and China could open up an unwelcome can of worms," said Stephen Innes at AxiCorp. 

"The market's primary thesis on what ultimately matters for growth assets is whether a US-China geopolitical escalation morphs into an economic dustup."