Global stocks push higher, dollar sapped by rate hike uncertainty

World shares started the week on the front foot on Monday, amid conflicting signals of a potential truce in the China-U.S. trade dispute, while the Federal Reserve’s new-found concerns over the global economy sapped the dollar.

Asia took a while to warm up but made a strong finish [.T][.SS] and Europe started well too as a 1 percent jump in mining, tech and bank stocks helped traders shrug off last week’s Brexit woes. [.EU]

In the currency market, the pound saw some respite as the dollar went limp. E-Mini futures for the S&P 500 also turned higher, having dithered in Asia.

Wall Street had firmed on Friday after U.S. President Donald Trump said that he might not impose more tariffs on Chinese goods after Beijing sent a list of measures it was willing to take to resolve trade tensions.

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The comment stoked speculation of a deal when Trump meets Chinese President Xi Jinping on the sidelines of a G20 summit in Argentina this month.

However, Chinese-U.S. tensions were clearly on display at an APEC meeting in Papua New Guinea over the weekend, where leaders failed to agree on a communique for the first time ever.

U.S. Vice President Mike Pence said in a blunt speech that there would be no end to U.S. tariffs on $250 billion of Chinese goods until China changed its ways.

“The comments from Trump were seen as offering a glimmer of hope that further tariff action could be held in abeyance,” said NAB’s head of FX strategy, Ray Attrill.

“The exchange of barbs between Pence and Chinese President Xi Jinping in PNG on the weekend continues to suggest this is unlikely.”

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SENSING A FED SHIFT
Also uncertain was the outlook for U.S. interest rates.

Federal Reserve policymakers are still signaling rate increases ahead but also sounded more concerned about a potential global slowdown, leading markets to suspect the tightening cycle may not have much further to run.

Investment bank Goldman Sachs chimed in, saying it expected the pace of U.S. economic growth to slow toward the global average next year.

As a result, it now sees a broad dollar decline next year. It revised its long-standing bearish view on the Japanese yen and tipped Latin American currencies, the Swedish krona, the Canadian, Australian and New Zealand dollars and the Israeli shekel to rise.

“We see several changes to the global economic backdrop which, combined with a few negative medium-run factors, point to more downside than upside to the broad dollar in 2019,” Goldman analysts said in a macroeconomic outlook report.

That will focus attention on an appearance by New York Fed President John Williams later on Monday to see if he echoes the same theme.

Investors have already lengthened the odds on further hikes, with a December move now priced at 73 percent, down from over 90 percent. Futures imply rates around 2.74 percent for the end of next year, compared to 2.93 percent early this month. <0#FF:>

Yields on U.S. 10-year paper have duly declined to 3.08 percent, from a recent top of 3.25 percent.

The dollar followed to hover at 96.416 against a basket of currencies, down from a peak of 97.693. The euro was parked at $1.1417, while the dollar backed off to 112.72 yen.

Sterling edged higher to $1.2854 after political turmoil over Brexit caused steep losses last week.

British Prime Minister Theresa May said on Sunday that toppling her would risk delaying Brexit as she faces the possibility of a leadership challenge from within her own party.

With both pro-EU and pro-Brexit lawmakers unhappy with the draft agreement, it is not clear that she will be able to win the backing of parliament, increasing the risk that Britain will leave the EU without a deal.

In commodity markets, gold found support from the drop in the dollar and held at $1,1220.19.

Oil prices suffered their sixth straight week of losses last week, but have found some support from expectations that the Organization of the Petroleum Exporting Countries will cut output.

Brent crude was up 54 cents at $67.30 a barrel, while U.S. crude gained 70 cents to $57.16.

Exclusive: U.S. shale firms offer $100 million to aid Texas, New Mexico

More than a dozen top U.S. energy companies have pledged $100 million toward easing stresses on health care, education and civic infrastructure from the shale oil and gas boom in West Texas and New Mexico, the group said on Sunday.

Chevron, EOG Resources, Exxon Mobil and Royal Dutch Shell are among 17 companies backing the Permian Strategic Partnership, as the consortium is called, Don Evans, a former U.S. government official and energy executive helping launch the group, told Reuters on Saturday.

The group seeks to address labor and housing shortages, overtaxed health care and traffic congestion caused in part by companies descending on the Permian Basin, the nation’s largest oilfield, where they hope to pump billions of dollars’ worth of oil and gas in coming decades, experts said.

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“It’s a significant amount of money, but these are huge challenges,” said Evans, a former U.S. Secretary of Commerce who lives in Midland, Texas, the epicenter of the shale oil revolution. “We don’t have enough teachers. We don’t have enough doctors.”

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The group aims to work with regional and federal officials, companies, nonprofit groups and educators in New Mexico and Texas, said Evans, who started in the Permian and became CEO of producer Tom Brown Inc before joining the administration of former President George W. Bush.

The group is assembling plans to hold meetings in communities across the region, so “everyone have a voice” in the undertaking. There is no timetable or plan for how the initial contribution will be spent. The group is recruiting staff and searching for office space, he said.

In the last decade, the region’s many pockets of oil and low production costs have led to gold rush-like conditions in the Permian. Companies are pouring staff and equipment into the oilfield, which is expected to pump 3.7 million barrels of oil per day by December, four times its rate in 2010, according to the U.S. Energy Information Administration.

That boom has local employers, including restaurants and school systems, under pressure from staff leaving for oilfield jobs. Midland’s unemployment rate was 2.1 percent in October, compared to the nation’s 3.7 percent rate.

The last decade’s shale boom also has led to school overcrowding, soaring traffic fatalities, drug abuse and strains on the power grid because of the activity.

“Our roads are not designed to handle the amount of truck traffic we have,” said Jeff Walker, transportation training coordinator at New Mexico Junior College in Hobbs.

Drug charges in Midland more than doubled between 2012 and 2016, to 942 from 491, according to police data. Traffic accidents also jumped 18 percent between 2016 and 2017 in Midland County, and 29 percent in nearby Ector County, according to Texas Department of Transportation data.

“They all agree that scaling up infrastructure is going to be a huge challenge,” said Bob Peterson, a partner at consultancy Arthur D. Little who advises producers. “There’s a common agreement that there’s a whole bundle of problems.”

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