Stocks worldwide hit one-month highs and U.S. Treasury yields surged on Thursday as renewed U.S.-China trade optimism and upbeat U.S. economic data boosted risk appetite and lured investors away from safe-haven assets.
The announcement that top negotiators from the United States and China will meet in early October in Washington raised hopes of a possible resolution to the two countries’ brutal trade war that has shaken markets and wreaked havoc on the global economy.
The news built on Wednesday’s tide of optimism after the British parliament blocked a no-deal exit from the European Union and Hong Kong scrapped the extradition bill that sparked riots.
“Yesterday we had two big geopolitical risks diminish, Hong Kong and Brexit,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “And today we had trade, the biggest of them all, diminish.
“It’s clear that stock prices are very much correlated and influenced by the political winds surrounding trade,” Pursche added.
In Toronto, the S&P/TSX composite index was unofficially up 125.97 points, or 0.77 per cent, at 16,574.81.
Eight of the index’s 11 major sectors rose, led by the 2.7-per-cent climb in the energy sector.
The financials sector gained 1.4 per cent, while the industrials sector rose 1.6 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2.5 per cent as gold futures fell.
Leading the index were Descartes Systems Group Inc., up 10.0 per cent, Birchcliff Energy Ltd., up 8 per cent, and CannTrust Holdings Inc., higher by 7.4 per cent.
Lagging shares were Centerra Gold Inc., down 9.3 per cent, First Majestic Silver Corp., down 9.1 per cent, and Detour Gold Corp., lower by 8.3 per cent.
U.S. private payrolls increased in August at their fastest pace in four months, accordin to ADP, blowing past analyst estimates ahead of Friday’s more comprehensive jobs report from the Labor Department.
A separate report showed the U.S. services industry rebounded last month to its fastest expansion since February, bouncing back from a three-year low, according to the Institute for Supply Management’s non-manufacturing purchasing managers index (PMI).
The Dow Jones Industrial Average rose 371.93 points, or 1.41 per cent, to 26,727.4, the S&P 500 gained 38.17 points, or 1.30 per cent, to 2,975.95 and the Nasdaq Composite added 139.95 points, or 1.75 per cent, to 8,116.83.
Euro zone and emerging markets stocks charged higher on the renewed trade hopes.
The pan-European STOXX 600 index rose 0.72 per cent and MSCI’s gauge of stocks across the globe gained 1.11 per cent.
Emerging market stocks rose 1.22 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.09 per cent higher, while Japan’s Nikkei rose 2.12 per cent.
News of the impending trade talks sent U.S. Treasury yields soaring on hopes that a long-elusive deal might remove an impediment to growth.
Benchmark 10-year notes last fell 31/32 in price to yield 1.5636 per cent, from 1.459 per cent late on Wednesday.
The 30-year bond last fell 73/32 in price to yield 2.055 per cent, from 1.957 per cent late on Wednesday.
The dollar held its losses against a basket of world currencies following the upbeat U.S. jobs data. Earlier, the news of renewed trade talks weighed on the dollar and the yen while boosting riskier currencies.
The pound sterling, however, rose to its highest level against the greenback in over a month on hopes that a no-deal Brexit could be avoided.
The dollar index fell 0.04 per cent, with the euro up 0.04 per cent to $1.1037.
The Japanese yen weakened 0.50 per cent versus the greenback at 106.94 per dollar, while Sterling was last trading at $1.2317, up 0.55 per cent on the day.
Gold prices slid as signs of a trade war thaw and stronger-than-expected U.S. economic data sent investors to riskier assets.
Spot gold dropped 2.1 per cent to $1,520.57 an ounce.
Copper rose 1.63 per cent to $5,841.50 a tonne.
Three-month aluminum on the London Metal Exchange rose 0.73 per cent to $1,788.00 a tonne.
Oil prices were little changed on Thursday as support from a sharp drawdown in U.S. crude inventories was countered by fears of slowing global demand growth amid doubts over resolving the U.S.-China trade feud.
Global benchmark Brent crude settled at $60.95 a barrel, rising 25 cents, while U.S. West Texas Intermediate (WTI) crude rose 4 cents to end at $56.30.
U.S. crude and product inventories fell last week, with crude drawing down for a third consecutive week despite a jump in imports, the Energy Information Administration said.
Crude stocks dropped 4.8 million barrels, nearly double analysts’ expectations, to 423 million barrels, their lowest since October 2018.
“It’s definitely a bullish report all around,” said Bob Yawger, director of energy futures at Mizuho in New York.
Oil soared more than 2 per cent after the EIA report, but prices gradually pared those gains as skepticism crept back over the prospect of a nearing trade deal between the world’s two top economies despite another round of talks being scheduled for next month.
“I think the market across the board has built in as much hopefulness as they can about the U.S.-China trade war,” said John Kilduff, a partner at Again Capital in New York.