Canada's main stock index opened higher on Monday as investors awaited an announcement on the North American Free Trade Agreement as the United States and Mexico attempt to reach a common ground.
At 9:30 a.m. ET, the Toronto Stock Exchange’s S&P/TSX composite index was up 70.97 points, or 0.43 per cent, at 16,427.02.
U.S. stocks opened higher on Monday, with the benchmark S&P 500 index and the Nasdaq hitting record highs on optimism around news that the United States and Mexico were closing in on a trade deal.
The Dow Jones Industrial Average rose 92.36 points, or 0.36 per cent, at the open to 25,882.71.
The S&P 500 opened higher by 10.00 points, or 0.35 per cent, at 2,884.69. The Nasdaq Composite gained 43.67 points, or 0.55 per cent, to 7,989.64 at the opening bell.
U.S. and Mexican trade negotiators are seen as close to reaching a common position on the North American Free Trade Agreement, with Mexican Economy Minister Ildefonso Guajardo saying on Sunday that talks have “continued to make progress”. Talks will scheduled to restart on Monday at 9 a.m. ET.
Also helping sentiment was Washington pressing the European Union to speed up trade negotiations.
Shares of automakers Ford, General Motors and Fiat Chrysler were up between 0.7 per cent and 1.1 per cent in early trading. Trade-sensitive industrials Boeing and Caterpillar rose 0.9 per cent and 1.4 per cent, respectively.
“What we are seeing is optimism that there is going to be some resolution to trade difficulties and then there’s the news of the U.S. and Mexico closing in on the NAFTA deal,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“Easing trade and NAFTA are probably the biggest things today but I think it’s more fundamental than that, because we’re still seeing a lot of signs of strength in the domestic economy and earnings stories have been very robust.”
Fed Chair Powell said on Friday that the central bank’s gradual interest rate hikes were the best way to protect the economic recovery, maintain strong job growth and keep inflation under control.
That helped the S&P 500 close at a record high on Friday, confirming the benchmark index’s longest bull-market run.
Shares of Tesla are slipping on the first day of trading after the electric vehicle maker said it won’t consider going private after all.
At the opening bell Monday, Tesla Inc. was trading at $319.96, down less than 1 per cent.
Late Friday, founder Elon Musk said that after consulting with shareholders, the Palo Alto, California, company will stay public.
World stocks rose to their highest level in over two weeks on Monday, following reassuring comments from the U.S. Federal Reserve chief, signs of progress on a U.S.-Mexico NAFTA trade deal and a bid by China’s central bank to stabilize the yuan.
A stronger-than-expected German business sentiment survey added to the upbeat mood in Europe, with stock markets in Paris and Frankfurt up about 0.5 per cent each.
British markets were closed for a public holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.1 per cent and Japan’s blue-chip Nikkei closed at a 10-week high.
That left the MSCI All-Country World index, which tracks shares in 47 countries, at its highest level since Aug. 9.
Comments from Fed chief Jerome Powell at the Jackson Hole symposium on Friday affirming that the U.S. central bank was sticking with its strategy of gradual rate hikes to protect economic growth sparked a rally in stocks that gathered pace as a new week swung into gear.
“The (NAFTA) talks add to the sense that while the U.S. is still bogged down in its trade conflict with China, it is perhaps more willing to compromise elsewhere such as with Mexico and the EU,” said Ulrich Leuchtmann, head of FX and emerging market research at Commerzbank in Frankfurt.
“It’s decreasing the risk of a global trade war.”
A strengthening in the Chinese yuan, one causality of heightened trade tensions, also boosted sentiment.
China’s yuan rose to a near 4-week high to the dollar after the central bank revived a “counter-cyclical factor” in its daily fixing to support the currency, halting a record 10-week slide that rattled global markets.
The announcement was seen as the latest signal from the People’s Bank of China that is not comfortable with a further yuan depreciation that could spark capital outflows from the cooling economy.
Spot yuan opened onshore trade at 6.8080 per dollar and closed domestic trade, at 0830 GMT, at 6.8171, or 19 pips firmer than the previous late night session close.
The offshore counterpart rose to a high of 6.7818, its strongest since July 31.
A firmer currency helped to lift Chinese shares to two-week highs, with the Shanghai Composite index closing up 1.9 per cent. Hong Kong stocks posted their biggest one-day percentage rise in six months.
The move raised hopes that a yuan recovery could boost companies with significant dollar-denominated costs, such as airlines. China Southern Airlines gained 4.5 per cent and Air China rose 3.25 per cent.
“China just seems to be stabilizing its currency and we’re getting used to that fact now, so we’re not looking at an ever-weaker CNY, which could raise issues,” said Robert Carnell, chief economist and head of research, Asia-Pacific at ING.
In Europe, data showed German business morale improved by much more than expected in August, suggesting that concerns about a global trade war among company executives in Europe’s largest economy have eased.
The Munich-based Ifo economic institute said its business climate index jumped to 103.8 from 101.7 in July.
That added to the upbeat tone in stocks markets but weighed on German bond yields, which rose to their highest level in more than two-weeks at 0.367 percent.
“We have low volumes today, but the biggest risks the market were discounting were trade wars, so any reduction in trade war risk such as NAFTA talks or even Trump trying to find bilateral deals with everyone, has pushed U.S. shares to new records and will support markets,” said Angelo Meda, head of equities and a portfolio manager at Banor SIM in Italy.
“The global economy is on track, there’s less trade war risk, the only cloud on the horizon is Italy,” Meda added, referring to upcoming budget talks in the weeks ahead.
In currency markets, the dollar steadied against its peers.
The dollar index, which tracks the U.S. currency against a basket of six major rivals, was up 0.1 per cent at 95.253.
The euro was marginally lower at $1.1608 after going as high as $1.1654, its strongest since Aug. 2, while hopes of progress in U.S./ Mexican NAFTA talks lifted the Mexican peso 0.6 per cent to 18.81 per dollar.
Oil prices fell, while gold edged lower as the dollar recovered.
Reuters and The Associated Press