April 5, 2018 / 4:22 PM / 10 months ago

GLOBAL MARKETS-Dollar, stocks climb in relief rally over trade spat

(Adds U.S. market open, byline, dateline; previous LONDON)

* Investors expect U.S., China to negotiate after all

* Dollar gains, bond yields rise

* World stock valuations cheapest in more than 2 years

By Herbert Lash

NEW YORK, April 5 (Reuters) - The U.S. dollar gained and equity markets around the world jumped on Thursday in a relief rally as fears eased of a trade war between China and the United States after Washington expressed a willingness to negotiate.

The dollar rose to a three-week high against the Japanese yen and a 10-week peak versus the Swiss franc, two safe-haven assets that investors buy in times of market uncertainty.

U.S. Treasury yields rose to one-week highs as rising stock markets were a sign of improving risk appetite amid expectations a growing economy will be confirmed Friday when the closely watched U.S. employment report for March is released.

Major European stock indexes surged 2 percent or more, with Germany's exporter-heavy DAX, the market most exposed to China, climbing 2.90 percent.

MSCI's all-country world stock index, which tracks shares in 47 countries, gained 1.12 percent, led by Amazon.com, Apple and Facebook.

"Markets seem to be in relief rally mode and part of this is really driven by the fact we're not really in a trade war yet," said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.

"This is quite small in terms of the impact to the economy, we still have the runway of tax reform that's coming along," Ripley said, referring to boost U.S. President Donald Trump's new tax code is delivering to corporate earnings.

The pan-European FTSEurofirst 300 index of leading regional shares rose 2.47 percent.

On Wall Street, the Dow Jones Industrial Average rose 324.01 points, or 1.34 percent, to 24,588.31. The S&P 500 gained 25.55 points, or 0.97 percent, to 2,670.24 and the Nasdaq Composite added 65.37 points, or 0.93 percent, to 7,107.48.

Signs the United States is looking to resolve a trade dispute with China lifted the dollar but limited an advance in oil prices as crude is dollar-priced and a stronger greenback makes oil purchases in other currencies more expensive.

White House economic adviser Larry Kudlow said he expects the United States and China to work out differences and trade barriers likely "will come down on both sides."

The dollar index rose 0.48 percent, with the euro down 0.46 percent to $1.2221. The Japanese yen weakened 0.63 percent versus the greenback at 107.45 per dollar.

Joe Manimbo, senior market analyst at Western Union Business Solution in Washington, said the dollar was boosted by a view that "Washington and Beijing might broker a trade deal that doesn't torpedo global commerce or damage the world economy."

U.S. crude rose 43 cents to $63.80 per barrel and Brent gained 51 cents to $68.53.

Gold prices fell as the apparent willingness to resolve a trade dispute reduced demand for bullion as a place to park money. A stronger dollar also crimped gold as it's more expensive for users of other currencies.

U.S. gold futures fell $11.70 to $1,328.50 an ounce.

Many suspect Washington will likely back down on some fronts after Beijing threatened tariffs on soybeans, the top U.S. agricultural export to China. Threats to such exports are a powerful weapon for Beijing to wield given the potential impact on Iowa and other farming states that backed Trump in the presidential election.

U.S. soybeans and corn regained ground, following losses of around 2 percent the previous day.

Reporting by Kit Rees; Additional reporting by Hideyuki Sano in Tokyo; Editing by Bernadette Baum

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