Crude prices and global equities markets rose on Friday, with the Canadian and major U.S. indexes setting record highs, on renewed hopes that the United States and China will reach a deal to de-escalate a 16-month trade war that has crimped global growth.
Equity markets from Tokyo to the major bourses in Europe and across the Americas gained on remarks by White House officials.
Economic adviser Larry Kudlow on Thursday cited what he called very constructive talks with Beijing about ending a 16-month trade war during an event at the Council on Foreign Relations in Washington.
“We’re getting close,” Kudlow said.
Progress was being made on an agreement’s details, according to U.S. Commerce Secretary Wilbur Ross, who said the trade talks were set to continue with a telephone call on Friday as both sides seek to hammer out a “phase one” pact.
Canada’s main stock index hit a fresh all-time high on Friday, tracking record levels on Wall Street.
The Toronto Stock Exchange’s S&P/TSX composite index was up 56.29 points, or 0.33 per cent, at 17,028.47.
Nine of the index’s 11 major sectors were higher, led by a 1.4-per-cent climb in the energy sector.
Cannabis producers pushed health care stocks down by 2.8 per cent. Aurora Cannabis Inc. dropped 18 per cent, while Cronos Group Inc. lost 7.4 per cent.
MSCI’s gauge of stocks across the globe gained 0.67 per cent, lifting it to within 1 per cent of an all-time high set in January 2018. Its emerging markets index rose 0.66 per cent.
In Europe, the pan-regional STOXX 600 index rose 0.4 per cent and the FTSEurofirst 300 index of leading shares adding 0.33 per cent.
On Wall Street, stocks rose across the board.
The Dow Jones Industrial Average rose 221.71 points, or 0.8 per cent, to 28,003.67, the S&P 500 gained 23.72 points, or 0.77 per cent, to 3,120.35 and the Nasdaq Composite added 61.81 points, or 0.73 per cent, to 8,540.83.
Ten of 11 S&P 500 sectors ended positive. Healthcare led the way, gaining 2.2 per cent for its biggest one-day percentage rise since January, with UnitedHealth Group shares surging 5.3 per cent and Pfizer rising 2.0 per cent.
The gains came as President Donald Trump made an announcement on healthcare price transparency. Regulatory and election risks have contributed to the healthcare sector’s underperformance in 2019, said Walter Todd, chief investment officer at Greenwood Capital in South Carolina, noting that perhaps Friday’s gains were “a catch-up trade.”
Shares of Applied Materials soared 9.0 per cent after the chip gear maker forecast first-quarter revenue and profit above Wall Street estimates.
The Philadelphia SE Semiconductor index gained 0.9 per cent and hit a record high. Enthusiasm for the group was tempered by a 2.7 per cent decline in Nvidia shares following the chipmaker’s report.
Data on Friday showed U.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing, which could temper expectations for a strong holiday shopping season.
“The market rally has largely been driven by the positive sentiment around the trade talks, obviously,” said Rahul Shah, chief executive of Ideal Asset Management in New York.
The fourth quarter, which tends to be the best period for corporate earnings, will likely be supportive of stocks going forward, but poor macroeconomic data or a political event could trigger a downturn, Shah said.
“Since the market is hitting all-time highs and everybody’s comfortable, the risk of an event affecting the market negatively is higher now because the market is an elevated level,” he said.
The S&P 500 has gained almost 25 per cent year to date, and the benchmark index is trading at 18 times forward earnings, or higher than a historical norm of about 15.
Gold prices and government debt prices fell as investors leaned away from safe-haven assets on fresh hopes the United States and China will de-escalate trade tensions.
U.S. gold futures settled down 0.3 per cent at $1,468.50 per ounce.
The benchmark 10-year U.S. Treasury notes fell 5/32 in price to push yields up to 1.8342 per cent.
Germany’s 10-year Bund yield traded at -0.332 per cent.
Oil futures gained nearly 2 per cent on Friday as comments from a top U.S. official raised optimism for a U.S.-China trade deal, but worries about increasing crude supplies capped prices.
Brent crude gained $1.02, or 1.6 per cent, to settle at $63.30 a barrel, while West Texas Intermediate crude rose 95 cents, or 1.7 per cent, to settle at $57.72 a barrel.
Both benchmarks posted their second straight weekly gain. Brent rose 1.3 per cent, and WTI gained 0.8 per cent.
A monthly report from the International Energy Agency weighed on prices, after it estimated that non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year compared with 1.8 million bpd in 2019, citing production from the United States, Brazil, Norway and Guyana.
“Today’s monthly IEA release offered some bearish aspects in the form of an unexpected upward adjustment in non-OPEC oil supply growth for next year that briefly forced WTI values to below yesterday’s lows,” said Jim Ritterbusch, president of Ritterbusch and Associates.
OPEC Secretary General Mohammad Barkindo had painted a more upbeat picture earlier this week, saying growth in rival U.S. production would slow in 2020, although a report by the group had also said demand for OPEC oil was expected to dip.