A deal on Britain’s departure agreed with the European Union sent sterling to a five-month high on Thursday and hoisted European stocks to a year-and-a-half peak before doubts about UK parliamentary support brought them back to earth.
Wall Street rose as upbeat earnings from Netflix and Morgan Stanley affirmed a strong start to the U.S. reporting season, while the dollar fell against the euro as the common currency got a lift on the long-awaited Brexit deal.
But the Irish border riddle remained a sticking point for Northern Ireland’s Democratic Unionist Party (DUP), which withheld its backing and created doubt among investors.
The DUP’s opposition reduces the chances of British Prime Minister Boris Johnson winning parliamentary ratification at the extraordinary session of parliament on Saturday.
But after weeks of negotiations, British and EU leaders welcomed an agreement being struck.
“Where there is a will, there is a deal - we have one!” said European Commission President Jean-Claude Juncker as the news broke from Brussels.
Sterling, the key gauge of Brexit sentiment all along, jumped as much as a 1 per cent against the dollar, putting it on course for its best six-day gain in more than 30 years before the doubts and grumbles set in.
Market optimism faltered when the Northern Ireland party said it could not support the agreement, torpedoing hopes of a smooth passage through parliament.
Having ran up as far as $1.2988, sterling fell well under $1.28 before regaining momentum to trade at $1.2863, up 0.26 per cent on the day.
European shares edged lower as fading optimism over the Brexit deal was offset by strong earnings from Sweden’s Ericsson.
France’s CAC 40 index eased 0.4 per cent after hitting a fresh 12-year high earlier, while Germany’s DAX closed down 0.1 per cent, though near its strongest level in over a year.
Shares in domestically focused British companies and Irish firms, which have been seen as a barometer on Brexit sentiment, also gave up initial gains.
London’s benchmark FTSE index closed up 0.2 per cent and the broad-market pan-European STOXX 600 fell 0.1 per cent, while the FTSEurofirst index of leading regional European shares slid 0.12 per cent.
UK Gilts, German Bunds, gold and most other safe havens also rebounded after selling off.
Canada’s main stock index finished flat on Thursday, despite a jump by cannabis stocks as legalization of marijuana derivatives including edibles and beverages took effect.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 0.88 points, or 0.01 per cent, at 16,426.30
Shares of Hexo Corp. were the top performer on TSX with a 17.2-per-cent jump, while those of Aurora Cannabis Inc. Canopy Growth Corp. and Cronos Group Inc. rose between 0.6% and 7.8%.
So-called Cannabis 2.0 comes a year after Canada legalized use of recreational marijuana. Sales are expected to begin in mid-December.
Another bright spot was shares of First Quantum Minerals Ltd, which jumped 11.3 per cent after Pangaea Investment Management, backed by one of China’s biggest copper producers Jiangxi Copper, raised its stake in the Canadian miner to 10.8 per cent.
Only five of the index’s 11 major sectors were higher, led by a 3.7-per-cent jump in the healthcare sector.
The materials sector, which includes precious and base metals miners and fertilizer companies, added 1.2 per cent.
On Wall Street, Netflix Inc shares rose 2.5 per cent in heavy trade after the video streaming service provider added slightly more paying subscribers than Wall Street expected in the third quarter.
Morgan Stanley gained 1.5 per cent after the big lender beat analysts’ expectations for quarterly profit, buoyed by higher revenue from bond trading and M&A advisory fees.
Earnings season is dictating U.S. market moves, which has historically been the case, said Kristina Hooper, chief global market strategist at Invesco.
“The buck stops with earnings,” Hooper said. “The good news is most earnings reports thus far have been positive and that’s provided some nice momentum for the market.”
The Dow Jones Industrial Average rose 68.11 points, or 0.25 per cent, to 27,070.09. The S&P 500 gained 12.32 points, or 0.41 per cent, to 3,002.01 and the Nasdaq Composite added 37.93 points, or 0.47 per cent, to 8,162.12.
Emerging-market stocks also gained for a sixth day - their longest winning streak since early April - after U.S. Treasury Secretary Steven Mnuchin said U.S. and Chinese trade negotiators were nailing down a Phase 1 trade deal text for their presidents to sign next month.
The dollar index fell 0.4 per cent, with the euro up 0.47 per cent to $1.1122. The Japanese yen strengthened 0.10 per cent versus the greenback at 108.68 per dollar.
Gold rose as weak U.S. retail sales rekindled fears of an economic slowdown and concerns about possible risks to the Brexit deal supported bullion.
U.S. gold futures settled 0.3 per cent higher at $1,498.30 an ounce.
Oil prices rose about 1 per cent on Thursday after draws in U.S. fuel inventories, but gains were capped by a larger-than-expected rise in crude stockpiles and a series of weak economic figures.
Global benchmark Brent crude rose 49 cents, or 0.8 per cent, to settle at $59.91 a barrel. U.S. WTI crude gained 57 cents, or 1.1 per cent, to settle at $53.93 a barrel.
U.S. gasoline stocks fell by 2.6 million barrels in the week to Oct. 11, while distillate stockpiles , which include diesel and heating oil, fell by 3.8 million barrels, the U.S. Energy Information Administration said on Thursday.
But a soaring rise in crude inventories offset the draws. Crude stocks rose by 9.3 million barrels, far surpassing estimates for a build of 2.8 million barrels.
The rise was the result of a reduction in refining output for the week to its lowest capacity use nationwide since Hurricane Harvey in September 2017. Refining capacity use fell to 83.1 per cent as refiners shut in capacity across the country.
“This is generally a bullish report,” said Phil Flynn, senior energy analyst at Price Futures Group in Chicago. “Part of the problem for the build is that refineries are not running. Refinery runs fell down, which is a concern.”