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Stocks rise on U.S.-China trade hope; oil prices soar

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NEW YORK (Reuters) - Stocks around the world extended recent gains and oil prices jumped on Wednesday on optimism that the United States and China may be inching toward a trade deal, soothing fears of an all-out trade war and its possible impact on global growth.

Optimism regarding a trade deal boosted U.S. Treasury yields to their highest this year, while the U.S. dollar extended its losses after minutes from a Dec. 18-19 Federal Reserve policy meeting showed that many Fed policymakers said the central bank could be patient on future rate hikes.

Delegations from China and the U.S. ended talks in Beijing on Wednesday amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China’s markets.

China has pledged to purchase “a substantial amount” of agricultural, energy and manufactured goods and services from the United States, the U.S. Trade Representative’s office said on Wednesday.

MSCI’s all-country index .MIWD00000PUS climbed 1.14 percent for a fourth day of gains.

That added to advances since last week in equity markets around the world, following a strong U.S. employment report and comments from the Federal Reserve chief that calmed worries that U.S. interest rate hikes would hurt growth.

A range of Federal Reserve policymakers said last month they could be patient about future interest rate increases and a few did not support the central bank’s rate increase that month, minutes from their Dec. 18-19 policy meeting showed.

On Wednesday, a clutch of U.S. Federal Reserve officials said they would be cautious about any further increases in interest rates so that the central bank could assess growing risks to an otherwise-solid U.S. economic outlook.

The U.S. stock market was supported by advances by technology and other trade-sensitive sectors. The benchmark S&P 500 .SPX index is up by about 10 percent from 20-month lows hit around Christmas.

“If you want to gauge how investors are viewing the trade talks, just watch tech, and semiconductors in particular,” said Jack Ablin, chief investment officer at Cresset Wealth Advisors in Chicago.

The Dow Jones Industrial Average .DJI rose 169 points, or 0.71 percent, to 23,956.45, the S&P 500 .SPX gained 17.27 points, or 0.67 percent, to 2,591.68 and the Nasdaq Composite .IXIC added 76.86 points, or 1.11 percent, to 6,973.86.

The pan-European STOXX 600 benchmark closed up 0.53 percent, its highest close in nearly four weeks.

Optimism that the trade standoff would be resolved also lifted oil prices.

U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $52.32 per barrel, up $2.54, or 5.1 percent, the first time this year that WTI has topped $50. International Brent crude futures LCOc1 were up $2.71, or 4.62 percent, at $61.43 per barrel.

The dollar sank to its lowest since October, with gains led by the euro and sterling, as risk appetite improved and investors reduced their safe-haven bets.

“As long as you don’t see a situation where there is a negative turn much like what we saw over the last quarter, markets will probably view any trade development, even if they’re not concluded by the March 1 deadline, with modest optimism just because it reduces the downside risk to the outlook,” said Mazen Issa, senior FX strategist, at TD Securities in New York.

Improved risk appetite sent U.S. Treasury yields to their highest this year, ahead of the sale of new 10-year supply by the Treasury Department.

Benchmark 10-year notes US10YT=RR were last down 3/32 in price to yield 2.7261 percent after earlier rising to 2.747 percent, the highest since Dec. 28.

Gold prices rose on Wednesday, with spot gold XAU= rising 0.49 percent to $1,291.2 per ounce.

Reporting by Saqib Iqbal Ahmed; Additional reporting by Sruthi Shankar in Bengaluru and Gertrude Chavez-Dreyfuss in New York; Editing by Bernadette Baum and Chizu Nomiyama

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