Key world stock market indexes climbed to new records on Wednesday on hopes a U.S.-China trade deal will reduce tensions, but oil prices slid on doubts the pact will spur world growth and boost crude demand.
U.S. President Donald Trump and Chinese Vice Premier Liu He signed a Phase 1 deal that will roll back some tariffs and see China boost purchases of U.S. goods and services, defusing an 18-month conflict between the world’s two largest economies.
Liu said in remarks at the White House that the United States and China need to step up cooperation, and that the deal benefits both countries and the world.
The centerpiece of the deal is a pledge by China to purchase at least an additional $200 billion worth of U.S. farm products and other goods and services over two years, over a baseline of $186 billion in purchases in 2017.
MSCI’s all-world stock index set a record intraday high, as did the benchmark S&P 500, the Dow industrials and Nasdaq on Wall Street.
The deal is unlikely to significantly change the growth outlook, but it should allow companies to make the capital investments they haven’t, which is positive, said Marvin Loh, senior global macro strategist at State Street Global Markets.
“What’s most important to investors is a potential de-escalation and signs that de-escalation will continue this year, which is the outlook period for a lot of investors,” he said.
“If we can somehow take this out as one of the bigger risks that we had all last year, it does give some confidence to the market. Not necessarily from an economic but from a risk parameter perspective,” Loh said.
MSCI’s gauge of stocks across the globe gained 0.12 per cent and the pan-European STOXX 600 index rose 0.01 per cent.
In Toronto, S&P/TSX Composite index was unofficially up 62.27 points, or 0.36 per cent, at 17,415.17.
The index logged its third straight session of gains.
The materials sector, which includes precious and base metals miners, added 1.1 per cent as gold prices rose.
The energy sector dropped 1.1 per cent as U.S. crude and Brent crude prices slid
Health care stocks jumped 4.5 per cent as marijuana producers Hexo Corp and Aurora Cannabis Inc. rose 15.9 per cent and 15.5 per cent, respectively.
Lagging shares were Wesdome Gold Mines Ltd., down 11.7 per cent, Cogeco Communications Inc., down 9.3 per cent, and Ero Copper Corp., lower by 5.3 per cent.
On Wall Street, U.S. stocks ended higher on Wednesday with the Dow posting a record close.
The Dow Jones Industrial Average rose 91.16 points, or 0.31 per cent, to 29,030.83, the S&P 500 gained 6.2 points, or 0.19 per cent, to 3,289.35 and the Nasdaq Composite added 7.37 points, or 0.08 per cent, to 9,258.70.
Emerging market stocks lost 0.51 per cent.
Oil prices slipped on concerns the trade agreement may not provide much of a demand boost because the United States intends to keep tariffs on Chinese goods until a Phase 2 deal is reached.
Prices were also under pressure from a report by the Organization of Petroleum Exporting Countries. OPEC expects lower demand for its oil in 2020 even as global demand rises, as rival producers grab market share and the United States looks set for another output record.
Brent crude fell 49 cents to settle at $64.00 a barrel. U.S. West Texas Intermediate crude futures settled down 42 cents at $57.81 a barrel.
The dollar pared losses but remained lower against the euro and the yen after the signing of the trade deal, which may prove a mild negative for the greenback as it removes uncertainty.
The dollar index, tracking the unit against six major peers, fell 0.14 per cent, with the euro up 0.19 per cent to $1.1148.
U.S. Treasury yields declined as investors repositioned around new data showing producer prices barely rose in December.
A rise in the cost of goods was offset by weakness in services, the latest indication of tame inflation pressures that could allow the Federal Reserve to stand pat on interest rates this year.
Benchmark 10-year notes last rose 9/32 in price to yield 1.7882 per cent.
In Europe, investors flocked to new fund raisings by Italy and Belgium a day after Spain saw record demand.
The 10-year German bond yield fell 3 basis points to -0.201 per cent, not too far from the more than six-month highs of -0.157 per cent touched at the start of January.
U.S. gold futures settled up 0.6 per cent at $1,554 an ounce