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By Rodrigo Campos
NEW YORK (Reuters) - Stocks on Wall Street came off their highs in late trading after U.S. President Donald Trump announced a partial trade deal with China that could be signed within weeks, with the boost from New York enough to give stocks across the globe their largest daily gain in two months.
The British pound closed its strongest week against the dollar in over two years on hopes that Britain was moving closer to a smooth exit from the European Union and oil jumped over 2% after reports of an attack on an Iranian tanker.
The MSCI world equity index <.MIWD00000PUS> posted its first weekly rise in four. Frankfurt's main stock index <.GDAXI>, seen as sensitive to trade wars because of its export-oriented components, ended up 2.9% for its biggest daily gain since January 4.
The U.S.-China deal agreed on Friday covers agricultural purchases, currency and some aspects of intellectual property protections, and it averted a tariff hike scheduled for next week, though there was no mention of tariffs set to rise in December.
The S&P 500 rose as much as 1.9% but ended the day up 1.1% after the agreement announcement triggered selling.
"Anything that was less than a comprehensive agreement was likely to see some degree of market selloff," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.
"The timing had a lot to do with the volatility. There were 15 minutes to go in the trading day on a Friday," he said.
Investors had said they were hoping for, at best, a deal limited in scope, and noted that rhetoric had in the past failed to translate into meaningful action.
"We have been here before, where we have seen positive talk. It's possible they will be able to do a smaller deal around tariffs, where there is some room for movement," said Mike Bell, global market strategist at J.P. Morgan Asset Management.
The Dow Jones Industrial Average <.DJI> rose 390.17 points, or 1.47%, to 26,816.59, the S&P 500 <.SPX> gained 32.14 points, or 1.09%, to 2,970.27 and the Nasdaq Composite <.IXIC> added 106.27 points, or 1.34%, to 8,057.04.
The pan-European STOXX 600 index <.STOXX> rose 2.31% and MSCI's gauge of stocks across the globe <.MIWD00000PUS> gained 1.38%. Emerging market stocks rose 1.51%.
POUND RALLIES
Sterling jumped 2.55% versus the dollar this week, its largest weekly gain in more than two years. The EU Brexit negotiator reported a "constructive" meeting with his British counterpart.