A gauge of global equity markets hit a fresh five-month high on Friday on investor optimism over U.S.-Chinese trade talks and hopes a new Brexit vote next week will prove successful, but the dollar headed to its biggest weekly loss since early December.
Hopes of avoiding a chaotic exit from the European Union lifted stock indexes in Europe to highs last seen in October while substantive progress on U.S.-Sino trade talks as reported by China’s state-run news agency also buoyed sentiment.
Prime Minister Theresa May’s deputy warned lawmakers that unless they approved her Brexit divorce deal after two crushing defeats, Britain’s exit from the EU could face a long delay.
The dollar fell broadly, dragged lower by weak U.S. economic data that sent the euro higher and helped gold prices to rebound from below $1,300 an ounce. The pound paused for breath but stayed on course for its biggest weekly gain in seven weeks.
U.S. manufacturing output fell for a second straight month in February and factory activity in New York state was weaker than expected this month, further evidence of a sharp slowdown in economic growth early in the first quarter.
The reports added to recent weak U.S. economic data and underscored the Federal Reserve’s “patient” approach toward hiking interest rates, a trend that favors equities, said Rahul Shah, chief executive of Ideal Asset Management.
“Slower growth in the U.S. enables the Fed to be more patient, so that’s why you’re seeing some dollar weakness,” Shah said, adding it makes lower volatility stocks more appealing.
Higher U.S. rates than elsewhere among major economies will draw capital from foreign markets and ultimately put upward pressure on the dollar going forward, Shah said.
“It looks like the U.S. will avoid a recession in 2019, which gives a little bit of a green light to take a little more risk,” he said.
MSCI’s all-country world index, a gauge of equity performance in 47 countries, gained 0.65 per cent while the FTSEurofirst 300 index of leading European shares closed up 0.73 per cent as all major bourses in Europe rose.
Canada’s main stock index rose to its highest level in five months on Friday, as investor sentiment was lifted by reports that Beijing and Washington had made more progress in their trade talks.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 52.37 points, or 0.33 per cent, at 16,139.95.
Nine of the index’s 11 major sectors were higher, led by the health care sector, which rose 2.3 per cent as Aurora Cannabis Inc. jumped 7.6 per cent and Knight Therapeutics Inc. gained 6 per cent.
Financial stocks gained 0.7 per cent as Bank of Montreal rose 1 per cent and Royal Bank of Canada was up 0.9 per cent.
The energy sector was down 0.5 per cent as oil prices came off 2019 highs.
On Wall Street, the Dow Jones Industrial Average rose 139.07 points, or 0.54 per cent, to 25,849.01, the S&P 500 gained 13.99 points, or 0.50 per cent, to 2,822.47 and the Nasdaq Composite added 57.62 points, or 0.76 per cent, to 7,688.53.
Chipmakers, which get a large portion of their revenue from China, rose, with the Philadelphia SE chip index up almost 3 per cent, while the broader technology sector rose 1.2 per cent.
Boeing Co. rose 1.5 per cent after the company said a software upgrade for the 737 MAX aircraft will be rolled out in the coming weeks.
Shares of the world’s largest planemaker have tumbled about 11 per cent since its 737 MAX jets were grounded globally following a fatal crash involving one of its planes in Ethiopia on Sunday.
Facebook Inc. shares were down 2.5 per cent after the social media giant said late Thursday that Chief Product Officer Chris Cox would be leaving the company.
The stock briefly added to losses and Google-parent Alphabet lost ground after the Washington Post reported that U.S. state attorneys general are signaling they are willing to take action against those and other companies
Fed officials are scheduled to meet next week to assess the economy and the course of U.S. monetary policy. While no change in rates is expected officials might take a more cautious view on the global economy after a volatile week in currency markets.
Sterling rose 0.29 per cent to $1.3277 and the dollar index fell 0.18 per cent. The euro gained 0.12 per cent to $1.1316 while the Japanese yen strengthened 0.20 per cent versus the greenback at 111.51 per dollar.
Benchmark 10-year and 2-year U.S. Treasury yields fell to their lowest levels since early January, pushed lower by the weak U.S. economic data and the growing perception the Fed will stand pat on raising rates for the rest of the year.
The benchmark 10-year U.S. Treasury note rose 9/32 in price to push yields lower at 2.5979 per cent.
U.S. crude futures briefly hit a 2019 high but later retreated along with benchmark Brent oil as worries about the global economy and robust U.S. production put a brake on prices.
West Texas Intermediate (WTI) crude oil futures settled down 9 cents to $58.52 a barrel. Brent crude futures slid 7 cents to settle at $66.16.
U.S. gold futures settled 0.6 per cent higher at $1,302.90 an ounce.