MSCI’s global stock index hit a record high on Thursday after President Donald Trump said the United States was “very close” to reaching a trade deal with China.
The comment, days before new U.S. tariffs on Chinese imports were to be imposed, also sent U.S. Treasury yields higher. Wall Street’s main indexes had pared gains by late afternoon trading after initially spiking higher after the comments.
Sterling fell from an eight-month high versus the dollar and deepened losses as the day wore on with voting underway in a U.K. election, which could decide whether Britain exits the European Union or holds a referendum that could reverse the country’s Brexit vote.
Earlier, European Central Bank head Christine Lagarde had promised a strategic review of the bank’s workings and left its easy money stance unchanged, as expected.
On Wednesday, the U.S. Federal Reserve held interest rates steady and signaled borrowing costs will not change anytime soon, with moderate economic growth and historically low unemployment expected to persist through the 2020 presidential election.
But U.S. investors appeared to be laser focused on U.S.-China trade relations, which has recently been a key reason for volatility. The market fell sharply last week when Trump said a deal may not come until after the 2020 presidential election.
“Having sent up that test balloon and failed, the administration is saying the Dec. 15 deadline needs to be extended,” said Art Hogan, chief market strategist at National Securities in New York.
“The market is saying we can remain constructive as long as you are working towards a deal. Escalation means bad things for both the market and the economy.”
The Dow Jones Industrial Average rose 220.62 points, or 0.79 per cent, to 28,131.92, the S&P 500 gained 26.93 points, or 0.86 per cent, to 3,168.56 and the Nasdaq Composite added 63.27 points, or 0.73 per cent, to 8,717.32.
Canada’s main stock index also rose slightly on Thursday, led by a jump in energy shares, after U.S. President Donald Trump tweeted saying Washington and Beijing were getting “very close” to a trade deal.
The energy sector climbed 2.1 per cent as U.S. crude prices were up, while health care stocks jumped 5.6 per cent, led by a 8.7-per-cent rise in Bausch Health Companies Inc.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 7.29 points, or 0.04 per cent, at 16,946.90.
Leading the index were Turquoise Hill Resources Ltd., up 13.8 per cent and Transcontinental Inc., higher by 8.2 per cent.
Lagging shares were Empire Company Ltd., down 9.1 per cent, Silvercorp Metals Inc., down 3.9 per cent, and Brookfield Renewable Partners LP, lower by 3.5 per cent.
The pan-European STOXX 600 index rose 0.33 per cent and MSCI’s gauge of stocks across the globe gained 0.49 per cent surpassing the previous record reached in January 2018.
In currencies, the dollar index, which measures the greenback against a group of major currencies, rose 0.42 per cent, with the euro down 0.2 per cent to $1.1106. The Japanese yen weakened 0.67 per cent versus the greenback at 109.30 per dollar.
As markets waited for results of the UK election, sterling was last trading at $1.3073, down 0.91 per cent on the day.
If U.K. Conservatives, led by Boris Johnson, gain a majority, that would allow the stalled Brexit deal to be passed. But the latest polls have shown his lead shrinking.
U.S. Treasury yields spiked with the long end hitting four-week highs after the trade deal comments.
Benchmark 10-year notes last fell 29/32 in price to yield 1.8904 per cent, from 1.79 per cent late on Wednesday.
The 30-year bond last fell 71/32 in price to yield 2.3204 per cent, from 2.22 per cent late on Wednesday.
Oil prices gained nearly 1 per cent on Thursday on hopes that the United States and China were close to reaching a deal on an ongoing trade dispute that has raised concerns about global demand for crude.
Brent crude futures rose 48 cents to settle at $64.20 a barrel. West Texas Intermediate (WTI) crude futures rose 42 cents to settle at $59.18 a barrel.
While prices received a fresh boost immediately following the tweet, futures eased somewhat during the session.
“It’s tough to draw a firm conclusion from the latest that came out,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. “It seems to be close, but we’ve all been waiting for this deal to happen.”