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Markets cautiously rebound amid unease over Brexit, trade wars, and French protests

News that China is moving ahead on talks with the United States helped rekindle investors' appetites.
Image: French President Emmanuel Macron poses before a special address to the nation
French President Emmanuel Macron poses before a special address to the nation, his first public comments after four weeks of nationwide 'yellow vest' protests, at the Elysee Palace, in Paris on Dec. 10, 2018.Ludovic Marin / AP
/ Source: Reuters

Stocks rose tentatively on Tuesday as investors picked through the rubble of conflagrations in some of the world's top economies amid uncertainty over Brexit, a China-U.S. trade war, and French protests.

Futures for the S&P 500 and Dow Jones Industrial Average were up half a percent early Tuesday, indicating the market was still digesting the chances of a fast solution to a trade conflict that has turned increasingly bitter in recent months.

Negotiations between China and the United States boosted stocks in Asia and Europe, while sterling floundered near 20-month lows as the market sought clarity on the next steps for Brexit after Britain's prime minister postponed a vote on her deal.

China's Vice Premier Liu He spoke with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, exchanging views on the next stage of trade talks.

The sign China is moving ahead on talks with the United States helped rekindle investors' appetite for equities and boosted European stocks, while domestic British stocks lagged amid deepening political uncertainty.

Trade-sensitive industrials, materials, and consumer stocks drove the European rally.

All sectors in Europe are in the red this year after oil became the last to give up all its 2018 gains as investors licked their wounds with a bruising year nearing its close.

Bond markets in Europe were focused on France as investors fretted over fiscal spending after the government announced concessions aimed at defusing weeks of often violent protests.

President Emmanuel Macron announced wage rises for the poorest workers and tax cuts for pensioners.

Macron's announcement "leaves open the question about how the new fiscal measures will be covered financially," wrote UniCredit analysts.

European investors were grappling with another crisis in Britain, meanwhile.

Sterling floundered at $1.2571 as traders sought to price in a range of possibilities after Prime Minister Theresa May's abrupt decision to postpone a parliamentary vote on her Brexit agreement on Monday, a move that sent the pound spiraling down.

"The market didn't expect her to win the vote anyway," said Andrew Koch, senior fund manager at Legal & General Investment Management. "If there's a full blown leadership contest, then it'll be different."