AFP – Upbeat data about US industry and positive corporate results sent US stocks higher on Wednesday in fresh bout of optimism.
The dollar also gained strength as expectations of multiple US interest rate rises this year returned.
European equities closed modestly higher, helped by currency weakness in the region but investors were spooked by North Korea’s threat to pull out of a summit with US President Donald Trump.
Wall Street recovered from Tuesday’s tumble, closing with the benchmark Dow Jones Industrial Average gaining 0.3 percent while the broader S&P 500 added 0.4 percent and tech-heavy Nasdaq rose 0.6 percent.
"We are seeing a rebound, with good data on industrial production and a rebound in oil prices," said Peter Cardillo of Spartan Capital Securities.
But trade and geopolitical concerns — including North Korea’s threat to pull out of the much touted June summit with President Donald Trump — are "overhanging the market," he said.
Meanwhile, expectations that the Federal Reserve may hike borrowing costs up to three more times this year have sent benchmark 10-year US bond yields to seven-year highs.
"The dollar index is finding itself at its best level since December," Fawad Razaqzada of Forex.com wrote in a note.
The euro, conversely, traded around the weakest level this year, with a series of soft economic data out of the eurozone denting the prospects of an end to the European Central Bank’s crisis-era stimulus. The pound continued to be dampened by Brexit uncertainty.
– Italy’s political instability –
"Although yields are slightly weaker today, they remain well supported in the US, especially the short-dated ones, as investors continue to expect there to be at least two more rate increases from the Fed this year," Razaqzada added.
Ongoing uncertainty in Italy weighed on Europe’s stock markets as the anti-establishment Five Star Movement and the League, which are in talks to form a government, were reportedly considering asking the ECB for debt relief.
That sent Milan’s FTSE MIB index plummeting.
Investors were trying to juggle several other global issues, including the outcome of Trump’s decision to pull out of the Iran nuclear deal, ongoing turmoil in the Middle East and the China-US trade spat.
There are hopes for a positive conclusion to the tariff stand-off between Washington and Beijing, but the latest round of talks will be closely monitored after a previous high-level meeting ended with no agreement and both sides far apart.
The White House confirmed that US Treasury Secretary Steven Mnuchin would lead the talks with China’s Vice Premier Liu He, and Trump trade advisor and China hardliner Peter Navarro reportedly has been barred from participating.
US-Europe relations, meanwhile, appeared to hit a new low on Wednesday when the EU’s top official launched a stinging attack on Trump, slamming his "capricious assertiveness," saying the US leader acted more like an enemy than a friend and called US metal tariffs "absurd."
– Key figures around 2100 GMT –
New York – Dow: UP at 24,768.93 points (close)
New York – S&P 500: UP 0.4 percent at 2,722.46 (close)
New York – Nasdaq: UP 0.6 percent at 7,398.29 (close)
London – FTSE 100: UP 0.2 percent at 7,73420 (close)
Frankfurt – DAX 30: UP 0.2 percent at 12,996.33 (close)
Paris – CAC 40: UP 0.3 percent at 5,567.54 (close)
Milan – FTSE Mib: DOWN 2.3 percent at 23,734 (close)
EURO STOXX 50: FLAT at 3,562.85 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 22,717.23 (close)
Hong Kong – Hang Seng: DOWN 0.1 percent at 31,110.20 (close)
Shanghai – Composite: DOWN 0.7 percent at 3,169.57 (close)
Euro/dollar: DOWN at $1.1808 from $1.1838 at 2100 GMT
Pound/dollar: DOWN AT $1.3491 from $1.3506
Dollar/yen: UP at 110.34 yen from 110.33 yen
Oil – Brent North Sea: 85 cents at $78.13 per barrel
Oil – West Texas Intermediate: UP 18 cents to $71.49