World stocks rose to a fresh two-month high on Tuesday to keep up their fast start to 2019 while the U.S. dollar strengthened for a fourth straight session as investors looked toward an annual address by the U.S. president later in the evening.
Boosted by U.S. and European equity performance, MSCI’s gauge of stocks across the globe gained 0.64 per cent, increasing for a sixth straight session as it hit a two-month high.
President Donald Trump was due to give his State of the Union speech at 9 p.m. ET,, with investors awaiting indications of progress in U.S.-China trade talks and watching for signs of tensions with Democrats following a 35-day partial federal government shutdown.
The Federal Reserve’s dovish recent statement on interest rate policy, along with optimism over U.S.-China tensions, has fueled recent risk appetite, even as estimates for U.S. corporate earnings have been falling.
“We could move significantly higher if the geopolitical environment improves, and we could also decline if things break down,” said Oliver Pursche, chief market strategist at Bruderman Asset Management in New York. “There will lots of hints tonight about the U.S. political landscape.”
Canada’s main stock index rose on Tuesday, as upbeat quarterly results from WestJet Airlines Ltd and others boosted sentiment.
The Toronto Stock Exchange’s S&P/TSX Composite index was up 100.37 points, or 0.64 per cent, at 15,702.69.
WestJet Airlines rose 3.7 per cent after reporting a quarterly profit that beat analysts’ estimates, as a rise in passenger traffic helped offset an increase in expenses.
The industrials sector gained 1 per cent.
Absolute Software Corp climbed 3.2 per cent, helping lift the technology sector 0.3 per cent, after the company beat quarterly profit estimates and forecast strong full-year revenue.
Ten of the index’s 11 major sectors were higher.
Health care stocks were down 1.2 per cent a day after a large rally. Cronos Group Inc. dropped 6.1 per cent, while Canopy Growth Corp. and Aurora Cannabis Inc. fell 2.4 per cent and 2 per cent, respectively.
The Canadian dollar weakened against its U.S. counterpart on Tuesday as oil prices fell and the greenback broadly climbed, with the loonie extending its pullback from a nearly three-month high at the end of last week.
The price of oil, one of Canada’s major exports, retreated from two-month highs as concerns over a global economic slowdown crept back into the market and a stronger U.S. dollar also weighed.
“There was a very brief tentative rally in crude prices and then that rally just completely evaporated around the middle of the day London time, and that appears to have taken the loonie with it,” said Ranko Berich, head of market analysis at Monex Canada and Monex Europe.
The U.S. dollar rose against a basket of major currencies as investors awaited President Donald Trump’s State of the Union address for a possible update on the U.S.-China trade war.
Canada is running a current account deficit as well as being a major commodities producer, so its economy could be hurt by an uncertain outlook for global trade.
The Canadian dollar was trading 0.2 percent lower at 1.3133 to the greenback, or 76.14 U.S. cents. The currency, which on Friday touched its strongest intraday level in nearly three months at 1.3069, traded in a range of 1.3102 to 1.3153.
The decline for the loonie came ahead of Friday’s release of Canada’s employment report for January, which could help guide expectations for additional interest rate hikes from the Bank of Canada.
U.S. stocks rose on Tuesday as largely upbeat corporate results fueled investor optimism ahead of the highly awaited State of the Union address by President Donald Trump.
Shares of Estée Lauder Cos Inc rose 11.6 per cent after the cosmetics maker’s quarterly results, driven by strong growth in China, topped estimates. Estée Lauder shares had the largest per centage gain among S&P 500 companies.
Luxury fashion company Ralph Lauren Corp also reported better-than-expected sales and earnings, sending its shares 8.4 per cent higher.
Shares of Alphabet Inc reversed course to end 0.9 per cent higher. The Google parent company’s results beat estimates, but its shares were dragged down earlier in the session by sharply higher spending.
Optimism toward the prospect of a lasting resolution to the dispute over border wall funding, which prompted a record 35-day partial U.S. government shutdown, also buoyed Wall Street, said Tony Roth, chief investment officer of Wilmington Trust in Wilmington, Delaware.
In his State of the Union speech, scheduled for 09:00 p.m. EST (0200 GMT Wednesday), Trump is expected to urge a congressional committee to work out a border security deal. His speech likely will target areas for potential bipartisan agreement, such as improving infrastructure and lowering prescription drug costs.
“The market doesn’t care if the wall gets built or if it’s never built,” Roth said. “All it cares about is that confidence and GDP aren’t negatively impacted as a result of a government shutdown.”
The Dow Jones Industrial Average rose 172.15 points, or 0.68 per cent, to 25,411.52, the S&P 500 gained 12.83 points, or 0.47 per cent, to 2,737.7 and the Nasdaq Composite added 54.55 points, or 0.74 per cent, to 7,402.08.
The CBOE Volatility index, often referred to as an investor fear gauge, dropped 0.16 point to finish at 15.57, its lowest close in four months.
Following a turbulent end to 2018, U.S. stocks have had a stellar run so far this year, with the S&P 500 and the Dow each up about 9 per cent and the Nasdaq rising more than 11 per cent.
In addition to corporate earnings, Wall Street’s rally this year has been helped by a recent dovish stance from the Federal Reserve and hopes of a trade deal between the United States and China.
Among other stocks, Boeing Co shares rose 3.3 per cent after the aerospace company said it made a significant investment in supersonic business jet developer Aerion.
Shares of Archer Daniels Midland Co slumped 5.9 per cent after the grains trader’s fourth-quarter profit missed expectations because of the U.S.-China trade dispute.
The pan-European STOXX 600 index rose 1.41 per cent, helped by a recovery in banks and a solid update from BP.
The dollar index, which measures the greenback against a basket of currencies, rose 0.21 percent, up for a fourth straight session, with the euro down 0.23 per cent to $1.1409.
Continued recovery in investors’ appetite for risk taking exerted pressure on safe-haven currencies, dragging the Swiss franc to an 11-week low against the dollar.
U.S. Treasury yields fell as investors priced in the Fed’s dovish interest rate outlook amid an uncertain global economic outlook.
“Yields are consolidating around levels that are more consistent with the new position at the Fed,” that it could effectively hold rates steady over the next six months, said John Herrmann, rates strategist at MUFG Securities in New York.
Benchmark U.S. 10-year Treasury notes last rose 7/32 in price to yield 2.7001 per cent, from 2.724 per cent late Monday.
Oil prices pulled back from two-month highs as concerns over a global economic slowdown crept back into the market and a stronger dollar also weighed.
U.S. crude settled down 1.7 per cent at $53.66 a barrel, while Brent settled at $61.98 a barrel, down 0.9 per cent.
Reuters