World equity markets rose on Friday to end an otherwise slow week on optimism around trade and benign U.S. inflation, while crude oil retreated on news of weaker U.S. factory activity.
On Thursday, White House economic adviser Larry Kudlow called progress in the trade negotiations between the United States and China “fantastic” and said the countries were “heading toward a remarkable, historic deal.”
Additionally, Bloomberg reported that a summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign a final trade deal could happen as soon as mid-March.
“The optimism over trade resolution is outweighing the weakening economic data,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
A slew of surveys has highlighted how much manufacturers are suffering worldwide, particularly those exposed to China’s slowdown, and added weight to expectations that policy tightening from central banks is pretty much over.
Yet a private survey showed China’s factory activity contracted for a third straight month in February, though at a slower pace, helping to lift global equities.
MSCI’s gauge of stocks across the globe gained 0.3 per cent.
Canada’s main stock index rose on Friday, boosted by gains in consumer stocks as well as the energy sector.
The Bank of Canada may be closer to a policy turning point, as it is set to hike its key interest rate once again later this year but there is now a small chance of a cut, according to economists polled by Reuters.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 69.24 points, or 0.43 per cent, at 16,068.25.
Consumer discretionary jumped 1.1 per cent. Gains in the sector were led by shares of Martinrea International, which was up 12.6 per cent after the auto supplier’s fourth-quarter revenue beat analysts’ estimates
Consumer staples were 0.8 per cent higher, led by a 2.8-per-cent increase in Alimentation Couche-Tard Inc.
The energy sector increased 0.8 per cent despite a decline in crude prices.
On Wall Street, the Dow Jones Industrial Average rose 111.27 points, or 0.43 per cent, to 26,027.27, the S&P 500 gained 19.29 points, or 0.69 per cent, to 2,803.78 and the Nasdaq Composite added 62.82 points, or 0.83 per cent, to 7,595.35.
Stocks were supported by a U.S. Commerce Department report showing tame inflation pressures and U.S. personal income falling for the first time in more than three years in January.
The modest inflation lends support to the Federal Reserve’s pledge to be patient on hiking U.S. interest rates, said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
“All of this helps toward a positive underpinning in the market,” she said.
Oil prices settled down about 2 per cent on Friday, ending around 3 per cent lower on the week as concerns over global demand growth after weak U.S. manufacturing data overshadowed OPEC-led supply cuts and sanctions on Venezuela and Iran.
After strengthening early in the session to over a three-month high, U.S. crude futures turned sharply lower on demand worries. The ISM manufacturing activity index in February sank to the lowest since November 2016, and was below expectations.
U.S. West Texas Intermediate crude (WTI) futures fell $1.42, or 2.5 per cent, to settle at $55.80 per barrel, after hitting $57.88, its highest since mid-November.
Global benchmark Brent crude futures for May settled $1.24, or 1.9 per cent, lower at $65.07 a barrel.
Despite hitting their highest levels since mid-November this week, Brent futures ended the week 3.3 per cent lower and WTI dropped 2.7 per cent.
“We have been the island of prosperity, globally, so if the economic slowdown is coming our way that is bad news for oil prices,” said John Kilduff, a partner at Again Capital LLC in New York. “We were up all morning until that data hit,” he said.
The U.S. dollar rose, hitting 10-week-highs against the yen, as risk appetite improved amid a more upbeat outlook on the euro and on the prospect of a U.S.-China trade deal.
“Risk-on sentiment amid a global stock rally worked in favor of the euro,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
The dollar was up 0.6 per cent against the Japanese yen after hitting a 10-week high.
The euro fell 0.1 per cent against the dollar at $1.1354.
U.S. Treasury yields were higher as investors sold off safe-haven assets on hopes for a trade deal with China and shrugged off economic data whose release was delayed by the government shutdown.
Benchmark 10-year Treasury notes last fell 14/32 in price to yield 2.7622 per cent, from 2.711 per cent late on Thursday.