A rise in U.S. technology stocks and better-than-expected economic data in China pushed global equity markets higher Monday, despite reports that Washington was considering escalating its trade war with China by delisting Chinese companies from U.S. exchanges.
U.S. President Donald Trump is looking at the move as part of a broader effort to limit U.S. investment in Chinese companies, sources told Reuters on Friday, though it was not clear how any such delisting would work.
MSCI’s gauge of stocks across the globe gained 0.28 per cent., following a 0.1-per-cent-gain for Europe’s Euro STOXX 600.
On Wall Street, the Dow Jones Industrial Average rose 95.9 points, or 0.36 per cent, to 26,916.15, the S&P 500 gained 14.89 points, or 0.50 per cent, to 2,976.68 and the Nasdaq Composite added 59.71 points, or 0.75 per cent, to 7,999.34
Conversely, Canada’s main stock index fell slightly on Monday, weighed down by resource and marijuana stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was down 35.64 points, or 0.31 per cent, at 16,658.63.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 1.6 per cent as gold futures fell.
The energy sector dropped 0.9 per cent as crude prices dropped.
The healthcare sector lost 2.1 per cent as cannabis companies fell, after a U.S. recommendation that consumers avoid vaping products containing the active ingredient in marijuana ahead of their legalization in Canada next month.
CannTrust Holdings Inc. fell 6.9 per cent, while Hexo Corp. and Aurora Cannabis Inc. lost 5.7 per cent and 4.9 per cent, respectively.
Leading the index were Interfor Corp., up 2.9 per cent, Bombardier In., up 2.9 per cent, and First Quantum Minerals Ltd., higher by 2.8 per cent.
Lagging shares were Silvercorp Metals Inc., down 9.2 per cent, Wesdome Gold Mines Ltd., down 7.0 per cent, and Iamgold Corp., lower by 6.6 per cent.
China has warned of instability in global markets from any “decoupling” with the United States, noting a U.S. Treasury response that said there were no immediate plans to block Chinese listings.
There were few signs that investors were fleeing to safe-haven assets, with benchmark 10-year notes last down 4/32 in price to yield 1.6853 per cent, from 1.673 per cent late on Friday.
Market players said the threat of delisting was being seen as just a tactic before U.S.-China trade talks resume next week. Investors are accustomed to belligerence from Trump before he dials down his rhetoric, said Luca Paolini, chief strategist at Pictet Asset Management.
“It’s a strategy that we have seen in the past - keeping the pressure very high and then settling for whatever deal is possible,” he said.
Any progress in talks next month would probably fall short of a comprehensive deal, he added. “It’s more likely than not that there will some kind of agreement that would be more cosmetic in nature.”
Also supporting the mood in Asia was economic data from China on Monday that showed sustained weakness in exports but a surprising improvement in domestic consumption indicators.
“This is better than what the market was expecting,” said Alessia Berardi, senior economist at Amundi Pioneer, adding that markets were downplaying the likelihood of a major escalation in the trade war by Washington.
“The probability of implementing the (delisting) decision for the market is still quite low,” she said.
Chinese markets will trade only on Monday before a week-long holiday that marks the 70th anniversary of the founding of the People’s Republic of China.
The dollar was little changed against a basket of six major currencies, adding 0.1 per cent to 99.117. Earlier this month it reached 99.37, its highest in more than two years.
China’s offshore yuan also held steady before China’s holiday, trading at 7.139 per dollar.
Oil prices fell on Monday on fading concerns of supply shortfalls and conflicts in the Middle East after the Sept. 14 attack on Saudi Arabia, but global benchmark Brent posted its biggest quarterly loss this year on demand fears due to the escalating U.S.-China trade war.
Brent crude futures settled at $60.78, down $1.13, or 1.8 per cent. U.S. West Texas Intermediate (WTI) crude futures, the U.S. benchmark, fell $1.84, or 3.3 per cent, to $54.07.
Brent gained 0.6 per cent while WTI fell 1.9 per cent in September after volatile month where prices spike nearly 20 per cent after the attacks halved Saudi Arabia’s output, but have pared nearly all those gains as output has been quickly restored.
For the quarter, however, global benchmark Brent fell 8.7 per cent, the worst quarterly drop since the fourth quarter of 2018, when prices dropped 35 per cent.
WTI also dropped 7.5 per cent in the third quarter, as concerns that the trade war between the United States and China has plunged global economic growth to its lowest levels in a decade weighed on oil demand growth.
China’s official Purchasing Managers’ Index (PMI) was slightly improved this month, increasing from 49.5 in August to 49.8 in September, but remained below the 50-point mark that separates expansion from contraction on a monthly basis, data from the National Bureau of Statistics showed.