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By Stephen Culp
NEW YORK (Reuters) - Stocks rebounded worldwide on Wednesday, and the U.S. Treasury yield curve steepened as upbeat geopolitical news and positive economic data from China helped revive risk appetite.
A parliamentary vote in Britain put the brakes on the nation's no-deal exit from the European Union, Hong Kong withdrew the contentious extradition bill that sparked recent protests and political turmoil in Italy appeared to be easing with the formation of a new coalition cabinet, all of which brought buyers back to equities markets.
China's services sector expanded in August at its fastest pace in three months as a jump in new orders prompted the biggest hiring increase in over a year, according to the Caixin/Markit services purchasing managers index (PMI).
"It looks like the situation in Europe might improve regarding Brexit, which is really an economic disaster," said Jim Bell, president, chief investment officer at Bell Investment Advisors in Oakland, California. "It's a refreshing development especially after September got off to a pretty grim start."
"The situation it Italy also looks to be positive," Bell added. "There seems to be a synchronized global uptick in confidence."
The U.S. trade deficit shrank in July, according to the Commerce Department, but bilateral gaps in goods trade with key partners widened. The deficit with China grew by 9.4% as the bruising Sino-U.S. trade war raged on and the deficit with the European Union hit a record high.
The Dow Jones Industrial Average rose 237.45 points, or 0.91%, to 26,355.47, the S&P 500 gained 31.51 points, or 1.08%, to 2,937.78 and the Nasdaq Composite added 102.72 points, or 1.3%, to 7,976.88.
The political developments in Europe and Hong Kong helped fuel a rally in European stocks, sending them to one-month highs.
The pan-European STOXX 600 index rose 0.89% and MSCI's gauge of stocks across the globe gained 1.18%.
Emerging market stocks rose 1.86%. MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.8% higher, while Japan's Nikkei rose 0.12%.
The U.S. Treasury yield curve was at its steepest in two weeks as two-year yields hit their lowest since September 2017 and improving risk sentiment sent longer-dated yields higher.
"If the yield curve gets itself back to its more common upward slope, that's a response to renewed confidence globally that things could get better," Bell said.
Benchmark 10-year notes last rose 2/32 in price to yield 1.4606%, from 1.466% late Tuesday.