Stock markets get continued lift from fresh trade hopes

China's latest comments have soothed investor worries at the end of a painful week for markets hit by uncertainty over the trade talks AFP / STR

Renewed hopes for trade talks kept stock markets mostly in the black on Friday after China suggested this week it might not retaliate against the latest US tariffs.

The relative calm made for a mostly positive final day to a bruising month, when economic and trade war fears eroded gains from June and July.

European bourses posted modest gains while Wall Street swung to a split finish after a choppy session, following mixed economic news on consumers and ahead of sharp increase in US tariffs on Chinese imports planned for Sunday.

Despite recorded gains for the week, the major New York indexes finished the month in the red for the first time since May.

"We may be facing up to the reality of recession but optimism continues to flow through the veins of investors following comments from the Chinese Commerce Ministry on Thursday," said Craig Erlam, senior market analyst at Oanda trading group.

The apparently easing tensions helped China's yuan strengthen slightly against the dollar, having fallen to an 11-year low earlier in the week.

Milan fell after Italy's anti-establishment Five Star Movement (M5S) warned that its tentative coalition deal with the center-left Democratic Party could still fall apart.

In the government bond market, the spread between Italy's bond yields and those of rock-solid Germany widened, indicating that investors were demanding a higher risk premium in return for investing in Italian sovereign debt.

Sterling rose against the euro and traded steady against the dollar after heavy Brexit-fuelled losses earlier in the week.

The dollar was about 0.6 percent higher against the euro, showing little reaction after US President Donald Trump lashed out at the Federal Reserve for allowing a strong dollar to make American exports less competitive.

'Relatively subdued'

US-China trade worries were "relatively subdued" and bond yields stabilized, said analysts at Charles Schwab, but few investors seemed to have the stomach to carry big positions into the coming US three-day weekend.

Earlier, Hong Kong started Friday more than one percent higher but finished with a gain of only 0.1 percent as the arrest of activists fuelled fresh worries about violent protests in the city.

Elsewhere, oil prices slumped after a three-day surge on positivity surrounding trade talks was coupled with a plunge in US stockpiles that pointed to improving demand.

On the corporate front, shares in Airbus rose after the European aircraft manufacturer earlier said it had agreed to sell 42 planes to Malaysian low-cost airline AirAsia X in a deal worth $5 billion before expected discounts.

The Asian carrier has placed a firm order for 12 long-range A330neo planes and 30 medium-range A321XLR models.