Global equity markets soared on Friday after data showed U.S. job growth increased by the most in 10 months in November, putting to rest recession fears and briefly taking the spotlight off contentious U.S.-China trade talks.
Canada’s main stock index rose on Friday, boosted by energy shares after OPEC and its allies agreed to supply cuts.
Crude prices rose sharply as a meeting of OPEC and its allies agreed to extend output cuts by 500,000 barrels per day in early 2020, sending the energy sector surging 4.5 per cent.
The additional cuts by the Organization of the Petroleum Exporting Countries and allies including Russia - a grouping known as OPEC+ - will last throughout the first quarter next year.
Markets overlooked data that showed the domestic job market lost a surprise 71,200 net positions in November while the unemployment rate rose to 5.9 per cent, the highest in more than a year.
Analysts said a repeat of the weak numbers could force the Bank of Canada to rethink monetary policy.
The Toronto Stock Exchange’s S&P/TSX composite index was up 142.05 points, or 0.84 per cent, at 16,996.97.
Leading the index were Cenovus Energy Inc., up 7.4 per cent, ARC Resources Ltd., up 7.1 per cent, and Tourmaline Oil Corp., higher by 6 per cent.
Lagging shares were Torex Gold Resources Inc., down 6.7 per cent, OceanaGold Corp., down 6.4 per cent, and First Majestic Silver Corp., lower by 5.9 per cent.
U.S. Treasury and German bund yields jumped, while gold slipped as much as 1 per cent, reflecting increased investor appetite for risk as U.S. unemployment dipped to 3.5 per cent, the lowest in nearly half a century.
The stronger-than-expected Labor Department data showed steady wage gains remained near their strongest in a decade, suggesting consumers will continue to drive the longest economic expansion in U.S. history, now in its 11th year.
The improving data would appear to validate the Federal Reserve’s decision in October to signal, after three interest rate cuts this year, that no more are needed for now.
“This certainly contributes to the idea that the U.S. economy is doing better than most folks would give it credit for,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
“This was a very solid report and should put those fears of recession firmly in the rear view,” he said.
MSCI’s gauge of stocks across the globe gained 0.84 per cent.
European equities rallied, with the pan-regional STOXX 600 index rising 1.16 per cent. Most major regional indices closed more than 1 per cent higher.
Shares on Wall Street rose as the report bolstered the consensus view that consumer strength will support the U.S. economy and in turn, equities.
Based on the latest available data, the Dow Jones Industrial Average rose 336.76 points, or 1.22 per cent, to 28,014.55, the S&P 500 gained 28.45 points, or 0.91 per cent, to 3,145.88 and the Nasdaq Composite added 85.83 points, or 1 per cent, to 8,656.53.
The dollar gained after weaker-than-expected U.S. data on manufacturing and the service sector earlier in the week helped drive five straight days of losses.
The dollar index rose 0.3 per cent, with the euro down 0.43 per cent to $1.1054. The Japanese yen strengthened 0.18 per cent versus the greenback at 108.57 per dollar.
Analysts said the jobs report showed underlying U.S. economic strength and offset mixed signals from other recent data.
“This is going to throw a wrench into the argument that the economy is slowing down,” said Andre Bakhos, managing director at New Vines Capital LLC in Bernardsville, New Jersey.
“Companies don’t hire if the economy is slowing down. Companies go the other way,” he said.
The unemployment report provided a respite from persistent pessimism on the economy and nagging doubts about the prolonged U.S.-China trade war, which faces a looming hurdle with a new round of U.S. tariffs scheduled to take effect on Dec. 15.
Most economic data will continue to take a back seat to the U.S.-China trade negotiations, which will remain the driver of market action for most of December, Arone said.
Top White House economic adviser Larry Kudlow said the Dec. 15 deadline is still in place but President Donald Trump likes where trade talks with China are going.
China said on Friday it would waive import tariffs for some soybeans and pork shipments from the United States.
The gesture aimed at concluding a “phase one” or interim deal to de-escalate the 17-month trade war that has roiled financial markets, disrupted supply chains and weighed on global economic growth.
China stocks posted their biggest weekly advance in nearly two months, with blue chips up 0.6 per cent.
Benchmark 10-year U.S. Treasury notes fell 13/32 in price to yield 1.8398 per cent.
Germany’s 10-year Bund yield rose to -0.273 per cent before paring some gains to trade at -0.291 per cent.
U.S. gold futures settled down 1.2 per cent at $1,465.10 an ounce.
- Oil prices rose more than 1 per cent on Friday and posted sharp weekly gains after OPEC and its allies agreed to deepen output cuts by 500,000 barrels per day in early 2020.
The additional cuts by the Organization of the Petroleum Exporting Countries and other major producers including Russia - a grouping known as OPEC+ - will last throughout the first quarter. The group will meet again in early March for an extraordinary meeting to set its policy.
Brent futures settled 1.6 per cent higher at $64.38 per barrel and rose about 3 per cent on the week.
West Texas Intermediate oil futures rose 1.3 per cent to $59.20 a barrel. They climbed about 7 per cent on the week, their biggest rise since June, after the U.S. government data on Wednesday showed domestic crude stockpiles falling for the first time in six weeks.
The OPEC+ cuts next year are in addition to the group’s previous agreed curbs of 1.2 million bpd and will represent about 1.7 per cent of global oil output.
OPEC will shoulder around two thirds of the additional cuts.
Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom, the world’s largest oil exporter and OPEC’s defacto leader, would continue a voluntary cut of 400,000 bpd.
He added that after improved compliance from other members, the actual cut will be effectively 2.1 million bpd.
“The Saudis did a good job of setting expectations that they could have additional cuts,” said Bob Yawger, director of futures at Mizuho in New York.