A gauge of global equity markets rose on Wednesday as sentiment improved after U.S. President Donald Trump said trade talks with China were going “very well” and a news report suggested key differences were being ironed out.
European stocks rallied, with the blue-chip Euro STOXX 50, Germany’s DAX and French CAC 40 gaining more than 1 per cent. The news reversed overnight losses in Asia when investors remained jittery over the prolonged talks.
Canada’s main stock index broke a three-day losing run on Wednesday as a jump in oil prices boosted energy shares and a report revived hopes of a preliminary trade deal between the United States and China.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 5.16 points, or 0.03 per cent, at 16,897.34.
The energy sector climbed 2.7 per cent, boosted by oil prices that rallied ahead of a possible extension to output cuts by the OPEC and its allies, with data showing a larger-than-expected drop in U.S. crude stockpiles adding to gains.
Leading the index were Hudbay Minerals Inc., up 11.9 per cent, MEG Energy Corp., up 7.8 per cent, and ARC Resources Ltd., higher by 7.6 per cent.
Lagging shares were Dollarama Inc., down 8.5 per cent, OceanaGold Corp., down 7.4 per cent, and Westshore Terminals Investment Corp., lower by 5.9 per cent.
The Canadian dollar strengthened to a two-week high against the greenback on Wednesday as investors cut bets that the Bank of Canada would ease interest rates over the coming months after upbeat comments by the central bank on the global economy.
Canada’s central bank held its overnight rate at 1.75 per cent as expected and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook.
“The Bank of Canada struck a more optimistic tone in their last monetary policy decision in 2019,” said Simon Harvey, FX market analyst for Monex Europe and Monex Canada. “The market implied probability of an insurance rate cut fell dramatically.”
Chances of an interest rate cut by March fell to less than 20 per cent from 35 per cent before the rate decision, data from the overnight index swaps market indicated.
The Canadian dollar was trading 0.8 per cent higher at 1.3194 to the greenback, or 75.79 U.S. cents, its biggest gain since Sept. 4. The currency touched its strongest intraday level since Nov. 19 at 1.3193.
The gains for the loonie came as U.S. President Donald Trump said that talks with China on an interim trade deal were going “very well,” boosting Wall Street.
Canada is a major exporter of commodities, including oil, so its economy could benefit from an improved outlook for global trade.
The U.S. dollar slumped against the euro after the Institute for Supply Management (ISM) reported activity in the U.S. services sector slowed more than expected in November amid lingering concerns about trade tensions and worker shortages.
The poor ISM reading did not derail the rally in equities because the underlying economic data overall is getting better, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.
“It’s looking more and more like two things: One, we’ve certainly pushed back heavy fears of recession this year and the next thing is the realization that we might be accelerating again, not only here but globally,” Paulsen said.
Trump, who on Tuesday had roiled markets after he raised the prospect of extended U.S.-Sino trade tensions, told reporters at a meeting of NATO leaders near London that “discussions are going very well and we’ll see what happens.”
The market is now focused on Dec. 15, when new U.S. tariffs on Chinese imports are scheduled to take effect. Nobody knows whether Trump is serious about going forward with the tariffs or if the date is a bargaining chip, said David Lafferty, chief market strategist at Natixis Investment Managers.
“Dec. 15 will be the tell,” Lafferty told reporters. Because if he delays or defers on Dec. 15, we know he’s not serious.”
Market sentiment rebounded earlier when Bloomberg reported that the two sides were closer to agreeing on how many tariffs would be rolled back in a “phase one” trade deal.
MSCI’s gauge of equity performance in 49 countries gained 0.58 per cent while stocks on Wall Street also rose, snapping a three-day losing streak.
Based on the latest available data, the Dow Jones Industrial Average rose 146.97 points, or 0.53 per cent, to 27,649.78, the S&P 500 gained 19.56 points, or 0.63 per cent, to 3,112.76 and the Nasdaq Composite added 46.03 points, or 0.54 per cent, to 8,566.67.
Investors also shrugged off a survey showing U.S. private-sector job growth unexpectedly slowed to its weakest pace in six months in November as goods producers and construction companies cut jobs.
Paulsen said the ADP National Employment Report is not that closely correlated with the payrolls data compiled by the U.S. Labor Department, which will release its November report on Friday. A slowdown in jobs creation in a tight labor market is understandable, he also said.
Yields on benchmark U.S. and euro zone government debt rebounded, with the 10-year U.S. Treasury note falling 21/32 in price to push its yield up to 1.7809 per cent.
The 10-year German bund’ s yield rose 1 basis point to -0.337 per cent and yields across the euro area followed suit, rising by 1 to 2 basis points.
The dollar index fell 0.08 per cent, with the euro down 0.08 per cent to $1.1072.
The Japanese yen weakened 0.27 per cent versus the greenback to 108.94 per dollar.
Oil prices surged more than 3 per cent on Wednesday on expectations that OPEC and allied producers would extend production curbs, and as U.S. government data showed a large drop in domestic crude stockpiles.
Brent crude futures ended the session up $2.18, or 3.6 per cent, at $63 a barrel after climbing to as much as $63.51. U.S. West Texas Intermediate (WTI) crude futures settled up $2.33, or 4.2 per cent, at $58.43 after touching a session high of $58.66 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, could approve deeper crude output cuts when they meet in Vienna this week.
U.S. crude stocks fell by 4.9 million barrels in the week to Nov. 29 as refineries hiked output, the Energy Information Administration said, a much deeper draw than expected. Analysts had forecast a decrease of 1.7 million barrels.
“A jump in refining activity and ongoing subdued net imports have helped yield the first draw to oil inventories in six weeks,” said Matt Smith, director of commodity research at ClipperData.