World shares edged toward a six-month high on Tuesday, as the biggest jump in Chinese stocks for over two years and a sharp rally in Europe’s oil and mining firms.
U.S. stocks opened higher on Tuesday, with the S&P 500 within striking distance of a record high, lifted by gains in technology stocks.
The Dow Jones Industrial Average rose 49.47 points, or 0.19 per cent, at the open to 25,551.65.
The S&P 500 opened higher by 5.52 points, or 0.19 per cent, at 2,855.92. The Nasdaq Composite gained 18.94 points, or 0.24 per cent, to 7,878.62 at the opening bell.
Canada's main stock index opened higher on Tuesday, as energy shares were boosted by rising oil prices.
The Toronto Stock Exchange’s S&P/TSX Composite index was up 71.67 points, or 0.44 per cent, at 16,491.91.
Shares of Perpetual Energy Inc. dropped 20 per cent on news Sequoia Resources Corp.'s bankruptcy trustee is seeking damages of $217-million as an alternative if it fails to convince a judge to annul a 2016 sale of Alberta gas wells to Sequoia.
The Canadian dollar strengthened to a nearly eight-week high against its U.S. counterpart on Tuesday as oil prices rose and the greenback broadly fell.
The price of oil, one of Canada’s major exports, was boosted by revived U.S. sanctions against major crude exporter Iran that could tighten global supply. U.S. crude prices were up 0.8 percent at $69.53 a barrel.
The U.S. dollar fell against a basket of its peers as expectations grew that the greenback’s recent rally on the back of escalating trade tensions may be coming to an end.
Canada runs a current account deficit, so its economy could be hurt if the flow of trade or capital slows. The country is in talks with the United States and Mexico to revamp the North American Free Trade Agreement.
Mexico’s economy minister Ildefonso Guajardo said on Monday the country has put forward a proposal to update the NAFTA trade pact’s contentious rules of origin, and in turn was studying the U.S. position.
The Canadian dollar was trading 0.2 per cent higher at $1.2982 to the greenback, or 77.03 U.S. cents.
The currency, which touched its strongest since June 14 at $1.2963, has been boosted in recent days by data showing stronger-than-expected growth in Canada’s economy in May and a record high for the country’s exports in June. Canada’s jobs data for July is due on Friday.
Oil prices ticked up as the United States reimposed some sanctions on Iran, while the Turkish lira was trying to bounce back from its worst day in a decade on Monday that had been prompted by a row with Washington.
The mood lifted overnight as Chinese stocks rebounded 2.7 per cent on hopes of fresh government spending, following a four-day selloff that had knocked them down about 6 percent.
London, Paris and Frankfurt then rose 0.8 to 0.9 per cent as Europe’s investors cheered both the move up in commodity stocks and results from Italy’s biggest bank UniCredit
“The Chinese have stabilized the yuan, the lira hasn’t been annihilated this morning so once the sharp FX moves have calmed down and as long as the (company) earnings are good, you have a more risk friendly environment,” said Societe Generale strategist Kit Juckes.
Currency markets remained volatile although less so than in recent sessions as the dollar dipped.
The euro bounced to $1.16 from a near six-week low despite a second day of disappointing German economic data, while Britain’s pound made back some ground after Brexit worries had pushed it to an 11-month low.
Turkey’s lira recovered as much as two percent from Monday’s losses of more than five percent after Washington had moved to end duty-free access to U.S. markets for some Turkish exports. A report by CNN Turk that Turkish officials would go to Washington to discuss the strained relations helped the rise, although it was starting to retrace again as U.S. trading began.
Already struggling with inflation at 14-year highs near 16 percent and political pressure on the central bank not to raise interest rates, the lira’s year-to-date losses are nearing 30 percent as jitters about foreign currency debt payments rise.
“Currently the impact of the lira’s slide is mostly contained within the country. But fears of a default will begin to increase if the currency keeps depreciating,” said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities. “Such a development could affect some European financial institutions,” he added.
An impressive global earnings picture and upgrades to the U.S. profit growth horizon continued to outweigh the global trade tensions and the various emerging market dislocations.
The VIX volatility gauge is now at its lowest since late January too, while a surge in U.S. corporate earnings driven by tax cuts - they achieved an annual aggregate growth rate of about 25 per cent in the second quarter - has prompted the likes of Citi to upgrade their end-2018 and 2019 earnings forecasts.
That renewed traction has buoyed market sentiment around the world, with Tokyo and Seoul both up 0.6 per cent and Hong Kong closing up more than 1.5 per cent along with Shanghai’s big bounce.
In commodities, oil extended the previous day’s rally after the imposition of U.S. sanctions against major crude exporter Iran took effect on Tuesday.
Benchmark Brent crude oil futures shook off earlier weakness and were 1.5 per cent higher at $74.80 a barrel. They had gained 0.75 percent on Monday after OPEC sources also said Saudi production had unexpectedly fallen in July.
On bond markets, borrowing costs for euro zone benchmark issuer Germany were edging off their lowest levels in almost two weeks as sidelined concerns about global trade and turbulence in Italy eased demand for the least risky assets.
The softer dollar helped metals. Copper was up 0.5 per cent at $6,161.50 a ton after retreating more than 1 per cent the previous day. Gold, which is stuck near a one-year low, crawled 0.2 per cent higher to $1,208.06 an ounce.
Reuters