Global stock indexes rallied on Tuesday as U.S. tech shares bounced back from the previous day’s selloff and investors weighed the possibility of a U.S. interest rate cut, while yields on U.S. Treasuries rose.
Longer-dated Treasury yields climbed back from their lowest since September 2017.
Federal Reserve Chairman Jerome Powell said the U.S. central bank will respond “as appropriate” to the risks posed by a global trade war and other recent developments.
His remarks followed St. Louis Fed President James Bullard’s comments late on Monday that a rate cut “may be warranted soon.”
Strategists said the comments suggested the Fed is considering its options.
Equity “investors are taking comfort in what appears to be a Fed that is contemplating cutting rates if the economy materially slows down,” said Michael Geraghty, equity strategist at Cornerstone Capital Group in New York.
In a brief statement included as part of a speech on broader monetary policy issues, Powell said the Fed was “closely monitoring the implications” of ongoing trade disputes.
The United States’ trade war with China and other countries has been escalating in recent weeks, increasing market uncertainty and worries about the global economy for investors.
U.S. technology stocks bounced back from Tuesday’s sharp selloff, driven by worries about a clamp-down on the world’s internet and social media giants. The Nasdaq also confirmed a correction at the day’s close, falling more than 10 per cent from its May 3 record high.
The Dow Jones Industrial Average rose 512.4 points, or 2.06 per cent, to 25,332.18, the S&P 500 gained 58.82 points, or 2.14 per cent, to 2,803.27 and the Nasdaq Composite added 194.10 points, or 2.65 per cent, to 7,527.12
Canada’s main stock index jumped higher on Tuesday amid broad-based gains
The Toronto Stock Exchange’s S&P/TSX composite index was up 150.35 points, or 0.94 per cent, at 16,166.24.
The financials sector added 1.3 per cent, led by a 4.2-per-cent gain in shares of Home Capital Group Inc. Manulife Financial Corp. gained 3.1 per cent.
Health care stocks jumped 5.4 per cent as Aurora Cannabis Inc. and Aphria Inc. rose 9.5 per cent and 6.8 per cent, respectively.
The materials sector, which includes precious and base metals miners and fertilizer companies, gained 1.2 per cent. First Quantum Minerals Ltd. rose 4.9 per cent, while Kirkland Lake Gold Ltd. was up 3.9 per cent.
The energy sector climbed 0.4 per cent with Tourmaline Oil Corp. and Husky Energy Inc. both rising 2.5 per cent.
The pan-European STOXX 600 index rose 0.59 per cent and MSCI’s gauge of stocks across the globe gained 1.13 per cent.
In U.S. Treasuries, benchmark 10-year Treasury yields rose 5.70 basis points to 2.138 per cent after hitting 2.061 per cent on Monday, their lowest since September 2017.
Jitters over the global economy have pushed investors into top-rated government bonds and other safety plays in recent weeks.
The dollar was near steady after Powell’s comments.
The dollar index rose 0.07 per cent, with the euro up 0.08 per cent to $1.1249.
The Japanese yen weakened 0.11 per cent versus the greenback at 108.20 per dollar.
The rally in stocks helped oil prices, and gold prices eased off of a three-month peak.
Oil prices ended as much as 1 per cent higher on Tuesday after a global stock market rally pulled Brent crude from a four-month low touched earlier in the session.
U.S. stock markets rallied almost 2 per cent on China’s request for dialogue with the United States to resolve the trade dispute and comments from U.S. Federal Reserve Chairman Jerome Powell drove expectations of an interest rate cut. [MKTS/GLOB]
Brent futures gained 69 cents, or 1.1 per cent, to settle at $61.97 a barrel. The global benchmark fell as low as $60.21 earlier in the session, its lowest since Jan. 29.
U.S. West Texas Intermediate (WTI) crude rose 23 cents, or 0.4 per cent, to $53.48, rising over a dollar from its session low.
The move higher comes ahead of market-moving U.S. weekly oil data which is expected to show crude stockpiles fell 800,000 barrels last week, their second decline in a row after inventories in mid-May rose to their highest in nearly two years, according to analysts in a Reuters poll.