Global stocks rallied on Tuesday and benchmark government bond yields tumbled after European Central Bank President Mario Draghi hinted at economic stimulus, while equities got an extra boost when U.S. President Donald Trump confirmed a meeting with China’s president amid the countries’ trade dispute.
The euro also slid after Draghi said the region's central bank will ease policy again if inflation fails to accelerate, signalling one of the biggest policy reversals of his eight-year tenure.
Draghi's comments fed beliefs that the Federal Reserve would also soon start easing monetary policy, with the U.S. central bank set to give its policy statement on Wednesday.
“It’s our view that the markets have been ahead of the central banks globally in signalling that there is a global economic slowdown underway, and that monetary policy in light of the current conditions are probably too tight and central banks need to reverse course, especially the Federal Reserve,” said Brad Peterson, regional portfolio advisor at Northern Trust Wealth Management in Chicago.
"We are getting confirmation of that in Europe and expect the same out of the Fed here this week," Peterson said.
The Fed is expected to leave borrowing costs unchanged at its meeting this week but possibly lay the groundwork for a rate cut later this year.
Trump has sought to influence the Fed to cut rates. In response to Draghi's comments, Trump on Tuesday accused the ECB president of trying to weaken the euro to gain an unfair competitive advantage.
Separately, Trump said he would meet with Chinese President Xi Jinping at the G20 summit later this month, and that trade talks between the two countries were set to restart ahead of time.
MSCI's gauge of stocks across the globe gained 1.06 per cent.
Canada’s main stock index gained on Tuesday, driven by precious metal miners and energy companies.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 149.90 points, or 0.92 per cent, at 16,503.35.
The materials sector, which includes precious and base metals miners and fertilizer companies, rose 1.6 per cent as gold prices neared 14-month highs. Ivanhoe Mines Ltd. jumped 7.4 per cent, while Yamana Gold Inc. was up 4.6 per cent.
The energy sector climbed 0.9 per cent as crude prices increased. Baytex Energy Corp. jumped 5 per cent, while Torc Oil and Gas Ltd. sat 5.6 per cent higher.
All of the index’s 11 major sectors were higher.
Hudson’s Bay Co. fell 2.2 per cent after activist shareholder Jonathan Litt lambasted a $1.74-billion bid to take the Canadian retailer private as “woefully inadequate.”
In New York, the Dow Jones Industrial Average rose 354.74 points, or 1.36 per cent, to 26,467.27, the S&P 500 gained 28.09 points, or 0.97 per cent, to 2,917.76 and the Nasdaq Composite added 108.86 points, or 1.39 per cent, to 7,953.88.
The pan-European STOXX 600 index rose 1.67 per cent, its best day since January.
Benchmark bond yields fell globally following Draghi's hints of more stimulus, with German bond yields hitting record lows deep in negative territory, around -0.32 per cent, and French 10-year yields turning negative for the first time.
"We're not that far from a 'whatever it takes' moment in the sense that the key message was they will do whatever it takes to avoid a worsening of macro conditions by year-end," said Didier Borowski, head of global macroeconomic research at Amundi.
Benchmark U.S. 10-year notes last rose 7/32 in price to yield 2.063 per cent, from 2.086 per cent late on Monday.
The dollar index, which measures the greenback against a basket of currencies, rose 0.06 per cent, with the euro down 0.16 per cent to $1.1199.
Oil prices rose more than $1 a barrel on Tuesday after news that China and the United States were rekindling trade talks ahead of a meeting at the G20 summit later this month, spurring hopes that the two countries would resolve an ongoing trade war.
Tensions in the Middle East after last week's tanker attacks, with the U.S. planning to send more troops to the Middle East, also lent support.
U.S. West Texas Intermediate crude futures rose $1.97, or 3.8 per cent, to settle at $53.90 a barrel. Brent crude futures gained $1.20, or 2 per cent, to settle at $62.14 a barrel.
"Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting," U.S. President Donald Trump tweeted.
China, which previously declined to say whether the two leaders would meet, confirmed the get-together.
“A common element that supported both (the oil and stock markets) from our perspective was the apparent increased possibility that some type of trade agreement could be worked out that could curtail the perceived downward economic growth path that has weighed heavily on the oil complex in recent weeks,” Jim Ritterbusch of Ritterbusch and Associates said in a note.