Some North American and European equity indexes scaled fresh peaks on Wednesday after China reported another decline in new coronavirus cases and on expectations of Chinese stimulus to counter a slowdown in growth.
Big manufacturing hubs on the Chinese coast are easing curbs on the movement of people and traffic while local governments prod factories to restart production, a return to economic normalcy sought by investors.
China is widely expected to cut its benchmark lending rate on Thursday, according to a survey of traders and analysts, after the country’s central bank lowered the interest rate on medium-term loans earlier this week.
The death toll from the coronavirus climbed above 2,000, but the number of newly reported cases fell for a second day to the lowest since January. That news that lifted Asian shares and spurred U.S. and European stocks to new highs.
“The coronavirus is the top headline these days and the growth in new cases, evidently, has slowed,” said Tim Ghriskey, chief investment strategist at Inverness Counsel.
“Perhaps we’ve seen the worst of it, at least in terms of the growth rate of new cases,” he said, noting there are signs of workers heading back to factories.
IHS Markit said in a research note that it expects the impact on the global economy to be limited, reducing growth by 0.1 per cent in 2020.
An index of equity performance across the globe, Wall Street’s S&P 500, the Nasdaq and two pan-regional indexes in Europe all climbed to new highs, as did the key index in Canada.
The Toronto Stock Exchange’s S&P/TSX composite index closed unofficially up 67.02 points, or 0.38 per cent, at 17,925.36, rising for a third straight session.
The index has gained in nine of the last 11 sessions.
Data on Wednesday showed Canada’s annual inflation rate rose to 2.4 per cent in January on higher gasoline prices. That came in above expectations of 2.3 per cent and the central bank’s target of 2 per cent, leaving analysts debating the possibility of an interest rate cut by the central bank in March.
The energy sector climbed 2.2 per cent with oil prices. The United States’ move to cut more Venezuelan crude from the market also aided the rise.
The financials sector rose 0.2 per cent, while the materials sector, which includes precious and base metals miners and fertilizer companies, added 1.1 per cent as gold futures rose.
Leading the index were Ballard Power Systems Inc., up 11.6 per cent, Torex Gold Resources Inc., up 9.6 per cent, and Whitecap Resources Inc., higher by 5.2 per cent.
Lagging shares were First Majestic Silver Corp., down 8.4 per cent, Bausch Health Companies Inc., down 6.5 per cent, and Lightspeed POS Inc., lower by 5.9 per cent.
MSCI’s gauge of stocks across the globe gained 0.45 per cent while its emerging market index rose 0.71 per cent.
The pan-regional STOXX 600 index in Europe rose 0.83 per cent. Chipmakers hit by Apple Inc’s coronavirus-related revenue warning led a broad rally, with Dialog Semiconductor, STMicroelectronics and AMS AG among the day’s top performers.
The Dow Jones Industrial Average rose 115.5 points, or 0.4 per cent, to 29,347.69, the S&P 500 gained 15.81 points, or 0.47 per cent, to 3,386.1 and the Nasdaq Composite added 84.44 points, or 0.87 per cent, to 9,817.18.
Technology stocks, which are sensitive to news related to China’s growth, gained 1 per cent, the most after energy among the 11 S&P sectors.
Overnight, MSCI’s index of Asian shares outside Japan rose 0.5 per cent. Japan’s Nikkei benchmark gained almost 1 per cent, helped by the retreat of the Japanese yen.
Stocks on Wall Street held gains after minutes of the Federal Reserve’s meeting last month showed policymakers were cautiously optimistic they could hold rates steady this year, even as they acknowledged risks posed by the coronavirus.
The dollar climbed to near a three-year high against a basket of other currencies and the safe-haven yen sank to a nine-month low on news of an apparent decline in the infection rate for the coronavirus and strong U.S. data.
U.S. homebuilding fell less than expected in January while permits surged to a near 13-year high, pointing to sustained housing market strength that could help keep the longest economic expansion in American history on track.
The dollar index rose 0.18 per cent, with the euro up 0.11 per cent to $1.0803.
The yen weakened 1.33 per cent versus the greenback at 111.38 per dollar.
Crude oil prices rose more than 2 per cent as demand worries eased with the slowing of coronavirus cases in China and supply curtailed by a U.S. move to cut more Venezuelan crude from the market.
Brent advanced $1.37 to settle at $59.12 a barrel. The global benchmark is up nearly 10 per cent since falling last week to its lowest this year. U.S. oil gained $1.24 to settle at $53.29 a barrel.
U.S. Treasury yields edged higher as expectations China will take more steps to bolster its economy boosted risk taking, and after U.S. economic data beat economists’ expectations.
Edward Park, chief investment officer at Brooks Macdonald, cited President Xi Jinping’s latest commitment to meeting 2020 growth targets.
“This in itself implies there will be more fiscal and monetary stimulus,” Park said. “That’s the real carrot for markets today.”
Benchmark 10-year U.S. Treasury notes last fell 3/32 in price to yield 1.5661 per cent.
Gold rose, holding above $1,600 per ounce, on safe-haven buying from investors seeking a hedge against a bigger economic impact from the coronavirus.
U.S. gold futures settled 0.5 per cent higher at $1,611.80 an ounce.