A gauge of global equity markets hit a record high on Monday, lifted by optimism over the planned signing this week of a U.S.-China trade deal and hopes the start of the U.S. corporate earnings season will not disappoint.
Gold prices fell almost 1 per cent ahead of the signing at the White House on Wednesday of the Phase 1 trade deal and as a de-escalation in U.S.-Iran tensions in the Middle East reduced bullion’s safe-haven appeal.
U.S. and euro zone government bond yields rose as the trade deal marks a major step in ending a dispute that has cut global growth and boosted demand for such safe-haven assets as bonds, gold and currencies like the Japanese yen and Swiss franc.
MSCI’s gauge of stocks across the globe gained 0.45 per cent, topping a record set Friday, while emerging market stocks rose 0.96 per cent. The benchmark S&P 500 and tech-heavy Nasdaq composite indexes also hit fresh highs on Wall Street.
Canada’s main stock index rose higher on Monday, despite a drop in commodity stocks.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially rose 58.93 points, or 0.34 per cent, at 17,293.42 - its highest ever.
The energy sector dropped 0.8 per cent as oil prices traded below the $65 per barrel mark, with easing tensions in the Middle East continuing to curb fears of supply disruptions.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1 per cent as a drop in gold prices undercut major gold mining stocks.
Health care stocks jumped 5.6 per cent as marijuana producers rose. Hexo Corp. was up 13.8 per cent, while Canopy Growth Corp. and Cronos Group Inc. were up 12.4 per cent and 10.4 per cent, respectively.
Industrial and tech stocks both increased 1.3 per cent.
Lagging shares were Corus Entertainment Inc., down 7.1 per cent, Alacer Gold Corp., down 5.6 per cent, and Centerra Gold Inc., lower by 5.4 per cent.
The United States is planning to lift its designation of China as a currency manipulator, Bloomberg reported, citing people familiar with the matter, a move that added to the positive mood among investors.
Middle East tensions rose after the United States killed a top Iranian general on Jan. 2 in Baghdad, knocking global stocks off a rally spurred in late 2019 on hopes a trade deal would be signed. Markets have rebounded as both Tehran and Washington desisted from further escalation after Iran retaliated for the killing with an missile attack on U.S. troops in Iraq.
Investors are waiting for corporate results that start in earnest this week with large U.S. banks, including Citigroup Inc , JPMorgan Chase & Co and Wells Fargo & Co due to report on Tuesday. Excluding energy, earnings growth estimates are 1.9 per cent, according to Refinitiv.
“It’s put up or shut up time,” said Joe Saluzzi, said co-manager of trading at Themis Trading in Chatham, New Jersey. “We’ve priced in a big rally, we expect growth and now it’s time to see it. If we have a good earnings season then it will be great.”
The Dow Jones Industrial Average rose 82.13 points, or 0.28 per cent, to 28,905.9, the S&P 500 gained 22.72 points, or 0.70 per cent, to 3,288.07 and the Nasdaq Composite added 95.07 points, or 1.04 per cent, to 9,273.93.
Facebook Inc and Apple Inc provided the biggest lift both to the S&P 500 and Nasdaq composite.
The pan-European STOXX 600 index lost 0.18 per cent.
Renault SA fell to a six-year low after a media report said Japan’s Nissan Motor Co Ltd had accelerated secret contingency planning for a potential split from the French carmaker.
Other European automobile stocks were also down, after China’s top auto body reiterated predictions that sales were likely to shrink for the third consecutive year in 2020.
In currency markets, the offshore Chinese yuan hit a 5-1/2-month high and the yen dropped to a 7-1/2-month low as the planned signing of the U.S.-China trade deal boosted sentiment.
The dollar index fell 0.01 per cent, with the euro up 0.14 per cent to $1.1136. The yen weakened 0.42 per cent versus the greenback at 109.92 per dollar.
Gold, considered a safe haven during political and economic turmoil, rose last week to an almost seven-year peak of $1,610.90 an ounce after a U.S. drone strike killed a top Iranian commander in Baghdad and Iran launched missiles against U.S. troops in Iraq in retaliation.
U.S. gold futures settled down 0.6 per cent at $1,550.60 an ounce.
Oil prices fell about 1 per cent on Monday as Middle East tensions eased and investors turned their focus to lackluster seasonal demand following last week’s bearish U.S. report showing a large fuel stockbuilds.
Brent crude settled down 78 cents at $64.20 per barrel. West Texas Intermediate (WTI) crude settled at $58.08 a barrel, down 96 cents.
Thin U.S. refinery margins for petroleum products have sapped crude prices, particularly as winter demand for heating oil has disappointed suppliers and gasoline margins have weakened, analysts said.
“It’s hard for crude oil to go higher if refiners continue to lose money or at best break even on gasoline,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service (OPIS).