Gold pushed further past $2,000 an ounce on Wednesday in the face of a weak dollar and expectations of more stimulus measures for the pandemic-ravaged global economy, while stocks in Europe and on Wall Street rallied on encouraging corporate earnings.
Oil prices rose to their highest since early March on a big drop in U.S. crude inventories and on the weak dollar, which was pushed lower by data showing euro zone business activity returned to modest growth in July.
The final Composite Purchasing Managers’ Index (PMI) from IHS Markit climbed to 54.9 from June’s 48.5, better than a 54.8 flash estimate, indicating significant improvement consistent with the continued easing of lockdowns, analysts said.
Gold set a new record after scaling $2,000 for the first time on Tuesday, as investors seek a store of value on fears government stimulus in response to the pandemic will trigger inflation, devalue other assets and keep bond yields low.
Spot gold prices rose 1.1% to $2,039.59 an ounce, after earlier reaching a record $2,055.10. U.S. gold futures hit a record $2,070.30 and settled up 1.4% at $2,049.30.
The dollar standard of the past 50 years is being openly questioned because of the U.S. Federal Reserve’s enormous increase in money supply, said Ryan Giannotto, director of research at alternative ETF provider GraniteShares.
“The dollar is collapsing under the weight of $3 trillion in printed dollars, this all comes out in the wash with higher gold prices,” Giannotto said.
Gold has gained nearly 35% so far in 2020 and is one of the year’s best-performing assets.
Concerns that the U.S. economy is stalling amid a surge in coronavirus cases has increased calls for more fiscal aid, a move stock investors have welcomed.
But after more than a week of talks and few signs of progress, top Democrats in Congress and White House officials were said to be aiming for a deal to be passed next week.
Energy stocks pushed Canada’s main stock index higher on Wednesday.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 133.58 points, or 0.82%, at 16,501.61.
The energy sector climbed 3.3%. Enerplus Corp. jumped 7.5&, while Cenovus Energy Inc. and Parex Resources Inc. rose 7% and 4.9%, respectively.
Also helping the main index, the materials sector added 0.6%, while financial and industrial stocks gained 1.6% and 0.9%, respectively.
On the macro front, data showed Canada’s trade deficit unexpectedly ballooned to $3.19-billion in June on a surge in imports of motor vehicles and parts as the economy started to reopen.
U.S. stocks climbed on Wednesday on the heels of a surprise quarterly profit from Disney and as investors stayed optimistic that a deal was near for a U.S. coronavirus fiscal aid package.
Walt Disney Co’s shares jumped, to put it among the biggest boosts to the S&P 500 and Dow. The stock notched its biggest daily percentage gain since March 24 as revenue declines for Disney parks and media networks were not as bad as feared.
“That is helping the Dow and that has been a laggard versus the S&P this year, but it is more than that,” said Willie Delwiche, investment strategist at Baird in Milwaukee. “At a time when everyone is talking about how big and how important these megacaps are to the S&P, kind of quietly you are starting to see a little bit of a leadership rotation.”
Unofficially, the Dow Jones Industrial Average rose 373.71 points, or 1.39%, to 27,202.18, the S&P 500 gained 21.52 points, or 0.65%, to 3,328.03 and the Nasdaq Composite added 58.22 points, or 0.53%, to 10,999.39.
Square Inc surged after the payments processor reported a 64% rise in second-quarter revenue, as consumers increased online buying and used its peer-to-peer Cash App platform during the pandemic.
As quarterly results have come in better-than-feared and heavyweight technology and technology-related companies have surged, a heavy dose of fiscal and monetary stimulus have helped fuel a rally in equities to bring the S&P 500 to less than 2% from its closing record on Feb. 19.
With 384 companies in the S&P having reported earnings through Wednesday morning, results are coming in 23.5% above expectations, in aggregate, according to Refinitiv data, the highest on record back to 1994.
Economic data painted a mixed picture, as U.S. services industry activity gained momentum in July, according to an ISM survey, with new orders jumping to a record high. However, hiring declined, supporting views that a recovery in the labor market was faltering.
Earlier, the ADP National Employment Report, which can be an inconsistent precursor to the government payrolls report set for Friday, showed U.S. private employers hired far fewer workers than expected last month.
“We know we had this tremendous rebound off the lows but what we need now is sustained strength,” said Delwiche.
U.S. Congressional Democrats and White House officials were set to resume negotiations on coronavirus relief legislation on Wednesday, with administration officials aiming for an agreement by Friday.
Financials, industrials and materials , that track economic growth, outperformed among the major S&P sectors.
Teladoc Health Inc fell after agreeing to buy chronic care provider Livongo Health Inc in a deal valuing the company at $18.5 billion, betting on a boom in online care and consultations spurred by the coronavirus crisis. Livongo shares also fell.
Electric truck maker Nikola Corp slumped after it reported a bigger quarterly loss in its first results as a listed entity.
In Europe, the broad FTSEurofirst 300 index closed up 0.3% at 1,417.05. London-listed mining groups Rio Tinto , BHP Group and Glencore provided the biggest boost, lifting the broader mining index up 4.0% on the back of stronger metal prices.
MSCI’s benchmark for global equity markets rose 0.8% to 563.53, less than 3% from its all-time peak in February. Emerging markets stocks rose 1.2%.
The U.S. dollar extended losses after U.S. private payrolls growth slowed sharply in July, pointing to a loss of momentum in the labor market and overall economic recovery as new COVID-19 infections spread across the United States.
The ADP National Employment Report showed private payrolls increased by 167,000, far less than an increase of 1.5 million economists polled by Reuters had forecast. U.S. Treasury yields rose after the report, halting their recent trend lower.
“Clearly, we have seen risk appetite rebound on global markets and sort of a return of the theme of a U.S. underperformance relative to world counterparts,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
The dollar index fell 0.3%, with the euro up 0.5% to $1.1861.
The Japanese yen strengthened 0.1% versus the greenback at 105.63 per dollar.
The U.S. government bond yield curve steepened as the prospect of increased supply in longer-dated debt dampened prices following the Treasury Department’s announcement that it would borrow more this quarter than previously anticipated.
The 10-year U.S. Treasury note rose 2.8 basis points to yield 0.5412%.
Oil prices rose. Brent crude futures settled up 74 cents at $45.17 a barrel, while U.S. crude futures added 49 cents to end at $42.19 a barrel.
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