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Stocks rallied globally on Friday after a run of strong U.S. corporate earnings reports fueled optimism about the economy, though three-year-high oil prices kept inflation risks alive and supported government bond yields.

U.S. investment bank Goldman Sachs Group Inc was the latest on Wall Street to trounce market expectations when it reported a 66% surge in third-quarter profit, thanks to a record wave of investment banking activity.

Canada’s main stock index finished at a record high on Friday, logging its best weekly performance since March, as the energy sector rallied on the back of higher oil prices.

The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 108.16 points, or 0.52%, at 20,928.10, exceeding the previous closing high of 20,821.43 set on Sept. 3.

“It really feels like people got a little too bearish heading into earnings season and what we’re seeing now is a bit of a short-covering rally in the market as first glimpses we’ve had of earnings have been okay,” said Gregory Taylor, portfolio manager at Purpose Investments.

Big U.S. financial institutions reported strong earnings this week, setting a positive tone in markets after fears over surging commodity prices, supply chain issues and inflation dogged equities.

Leading the charge in Canada on Friday, the energy sector advanced 0.2% as oil prices settled at a three-year high above $85 a barrel on Friday, boosted by forecasts of a supply deficit in the next few months as the easing of coronavirus-related travel restrictions spurs demand.

Brent crude futures settled up 86 cents, or 1%, at $84.86 a barrel. Front-month prices, which touched their highest level since October 2018 at $85.10, hit a weekly rise of 3%, its sixth straight weekly gain.

U.S. West Texas Intermediate (WTI) crude futures rose 97 cents, or 1.2%, to $82.28 a barrel. The was up 3.5% on the week in an eighth consecutive weekly rise.

Financials, which account for about 30% of the TSX’s market value, firmed 0.9% to a near two-month high.

Official data earlier in the day showed the domestic wholesale trade rose by 0.3% in August from July, below expectations, while producer prices most likely rose by 1.0% in September.

The Canadian dollar weakened against its U.S. counterpart on Friday but held on to most of this week’s gains as oil prices rose and risk appetite increased.

The loonie was trading 0.2% lower at 1.2389 to the greenback, or 80.89 U.S. cents, after touching its strongest intraday level since July 6 at 1.2337.

For the week, the currency was up 0.6%, its fourth straight week of gains.

“The pro-risk mood is CAD-supportive alongside high energy prices,” strategists at Scotiabank, including Shaun Osborne, said in a note.

U.S. stocks ended higher on Friday after Goldman Sachs became the latest big bank to report strong quarterly earnings, and Wall Street’s three major indexes posted gains for the week.

Goldman Sachs Group shares jumped, giving the Dow its biggest boost, as a record wave of dealmaking activity drove a surge in the bank’s quarterly profit.

Other big lenders also rose and were among the biggest positive for the S&P 500. The index’s bank index ended sharply higher.

Results from the big financial institutions this week have provided a strong start to third-quarter U.S. earnings, though investors will still watch in coming weeks for signs of impacts from supply chain disruptions and higher costs, especially for energy.

Forecasts now call for S&P 500 earnings to show a 32% rise in the third quarter from a year ago. The latest forecast, based on results from 41 of the S&P 500 companies and estimates for the rest, is up from 29.4% at the start of October, according to IBES data from Refinitiv.

“We’re starting to get into an earnings-driven rally here that I hope lasts. We’ll really see the results in the next couple of weeks as a great bulk of companies in all sectors report,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

Alcoa Corp shares surged after the aluminum producer reported stronger-than-expected results, announced a $500 million buyback program and initiated a quarterly cash dividend.

According to preliminary data, the S&P 500 gained 33.35 points, or 0.75%, to end at 4,471.61 points, while the Nasdaq Composite gained 73.55 points, or 0.50%, to 14,896.98. The Dow Jones Industrial Average rose 384.83 points, or 1.10%, to 35,297.39.

The U.S. Commerce Department reported a surprise rise in retail sales in September, although investors still worried that supply constraints could disrupt the holiday shopping season. A preliminary reading for consumer sentiment in October came in slightly below expectations.

Some airline and other travel-related company shares edged higher, with the White House announcing it will lift travel restrictions for fully-vaccinated foreign nationals effective Nov. 8.

Moderna Inc shares were lower. A Wall Street Journal report, citing people familiar with the matter, said the U.S. Food and Drug Administration is delaying its decision on authorizing Moderna’s COVID-19 vaccine for adolescents to check if the shot could increase the risk of heart inflammation.

On Thursday, an FDA panel voted to recommend booster shots of its COVID-19 vaccine for Americans aged 65 and older and high-risk people.

Shares of cryptocurrency and blockchain-related firms including Riot Blockchain gained as bitcoin hit $60,000 for the first time since April.

The pan-European STOXX 600 index rose 0.74% and MSCI’s gauge of stocks across the globe climbed 0.78%.

“We are clearly off to a good start of the third-quarter earnings season, but have miles to go before we sleep,” said Arthur Hogan, chief market strategist at National Securities Corp. He noted that only 35 of the S&P 500 companies have reported their earnings.

Unperturbed by news of a fatal stabbing of a British lawmaker on Friday, Britain’s FTSE 100 climbed 0.37% to hit a near 20-month high. The UK blue-chip index has now recovered all ground lost since the coronavirus pandemic began in March last year.

Soaring oil prices, which have fed investor concerns about their impact on businesses, also appeared to take a backseat.

Forecasts of a supply deficit over the next few months as demand rises on the back of relaxed travel restrictions drove oil prices to a three-year high of above $85 a barrel.

U.S. crude recently rose 0.79% to $81.95 per barrel and Brent was at $84.52, up 0.62%, after hitting a high of $85.10.

Bets that rising prices are likely to prompt central banks to raise interest rates sooner than expected lifted government bond yields, though gains were more pronounced in the United States than in Europe.

The yield on two-year U.S. Treasuries, which reflect short-term rate expectations, climbed to 0.3788%, from Thursday’s 0.354%.

In Europe, 10-year Bund yields slipped after notching seven straight weeks of gains on signs of rising inflationary pressure and robust economic growth.

The dollar, which has been bolstered by bets that the accelerating inflation could prompt the Federal Reserve to raise interest rates sooner than expected, touched a three-year high against the yen. One dollar bought 114.46 yen, the most since late 2018.

The dollar index, which measures the greenback against a basket of other currencies, was marginally lower on the day, slipping 0.04%, and set for its first weekly decline versus major peers since the start of last month, having lost a little ground to sterling and the euro.

Gold prices fell on Friday as a rebound in U.S. bond yields and a surprise increase in September retail sales dented bullion’s safe-haven status.

Spot gold fell 1.5% to $1,768.38 per ounce. U.S. gold futures settled down 1.7% at $1,768.30.

“Gold has everything going against it. Real rates are rising, equities are higher, so is bitcoin,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

The return of optimism will be tested by next week’s anticipated weaker growth data from China, and the impact of strengthening oil prices on consumers going into the winter months, said Mike Hewson, chief markets analyst at CMC Markets.

European car registrations slumped by more than a quarter in September, and Toyota Motor Corp said it would cut global output in November as chip shortages and supply chain problems continued to dog the sector.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.35%, rising 2.1% for the week in its best weekly performance since late June, while Japan’s Nikkei surged 1.81%, led by tech stocks.

Analysts largely attributed the gains in Asia to the U.S. rally.

Chinese shares rose more cautiously than elsewhere with blue chips up 0.38% ahead of next week’s growth figures.

A Chinese central bank official said on Friday that the spillover effect of China Evergrande Group’s debt problems on the banking system is controllable, in rare official remarks on the liquidity crisis at China’s No. 2 developer that has roiled markets.

Bitcoin hit a six-month high of $60,000 on Friday, approaching the record hit in April, as traders became increasingly confident U.S. regulators would approve the launch of an exchange-traded fund based on its futures contracts.

Reuters

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