U.S. and European stock indexes gained on Wednesday after news that U.S. President Donald Trump planned to delay tariffs on auto imports, offsetting earlier pressure on equities from weak U.S. and Chinese economic data that helped depress bond yields.
Trump is expected to delay a decision on tariffs on imported cars and parts by up to six months, three administration officials told Reuters. Fears about an escalating global trade war, particularly following a spike in U.S.-China tensions, have rattled markets over the past week.
Meanwhile, U.S. Treasury Secretary Steven Mnuchin said he will likely travel to China soon to continue talks as Washington and Beijing seek to resolve their months-long trade war.
Major U.S. and European stock indexes ended higher after falling earlier in the session.
On Wall Street, the Dow Jones Industrial Average rose 115.97 points, or 0.45 per cent, to 25,648.02, the S&P 500 gained 16.55 points, or 0.58 per cent, to 2,850.96 and the Nasdaq Composite added 87.65 points, or 1.13 per cent, to 7,822.15.
“The market was selling but rebounded,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “It’s symptomatic of a market that’s in short-term mode right now and what’s driving that right now is trade.”
Canada’s main stock index rose slightly on Wednesday.
The Toronto Stock Exchange’s S&P/TSX Composite index was unofficially up 33.61 points, or 0.21per cent, at 16,318.14.
Statistics Canada data showed Canada’s annual inflation rate edged up to 2.0 per cent in April from 1.9 per cent in March, driven in part by a carbon levy that pushed up gasoline prices in six provinces.
The data weakened the loonies to a six-day low against its U.S. counterpart, and money markets were factoring in a slightly higher chance of an interest rate cut by year end at more than 40 per cent.
The health care sector rose 1.1 per cent as Hexo Corp. and Aurora Cannabis Inc. jumped 5 per cent and 3.1 per cent, respectively.
MSCI’s gauge of stocks across the globe gained 0.49 per cent.
The positive trade developments lifted risk sentiment that had been dampened earlier in the session by weak economic data.
China reported surprisingly weaker growth in retail sales and industrial output for April. In the U.S., retail sales unexpectedly fell in April as households cut back on purchases of motor vehicles and a range of other goods, while other data showed a drop in industrial production last month.
U.S. Treasury yields fell, with the two-year yield hitting its lowest in 15 months after the disappointing U.S. data raised expectations the Federal Reserve will cut interest rates this year.
Benchmark 10-year notes last rose 14/32 in price to yield 2.3715 per cent, from 2.419 per cent late on Tuesday.
Yields on German bonds also sank deeper into negative territory.
“You have a tale of two markets,” said Willie Delwiche, investment strategist at Baird in Milwaukee. “U.S. stocks, particularly U.S. large-cap stocks, have rallied in response to ... trade-related headlines. But the curious thing is that the bond market has not responded.”
“It suggests to me that there is cause for some global concern in terms of the economy,” Delwiche said.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.06 per cent, with the euro down 0.04 per cent to $1.1199.
Oil futures inched up on Wednesday as the prospect of mounting tensions in the Middle East hitting global supplies overshadowed an unexpected build in U.S. crude inventories.
Brent crude settled at $71.77 a barrel, gaining 53 cents or 0.7 per cent. West Texas Intermediate (WTI) crude futures settled at $62.02 a barrel, climbing 24 cents or 0.4 per cent.
U.S. crude inventories rose unexpectedly last week to their highest since September 2017, while gasoline stockpiles decreased more than forecast, the Energy Information Administration (EIA) said.
Crude stocks swelled by 5.4 million barrels, surprising analysts who had expected a decrease of 800,000 barrels..