A gauge of global equities pushed closer to an all-time high on Wednesday after a batch of U.S. economic data brightened the economic outlook and investors remained bullish on the prospect of a U.S.-China trade accord.
MSCI’s gauge of stock markets across the globe gained 0.35 per cent and hovered about 1 point from an all-time high of 550.63 established in January 2018.
Major pan-European equity indexes traded at highs last seen in 2015 while MSCI’s emerging markets index also gained, all bolstered by hopes the United States and China were close to reaching an initial deal to end a 16-month trade war.
An improving economic outlook for 2020 has given investors more to cheer, said Joseph LaVorgna, chief economist for the Americas at French bank Natixis in New York.
“Basically, as goes the stock market so goes the economy, at least for now, and the equity market is telling you things are going to pick up,” LaVorgna said.
“If you look at what the equity market is telling us it is consistent with a pick-up of GDP growth next year,” he said.
Canada’s main stock index also jumped higher on Wednesday.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 64.69 points, or 0.38 per cent, at 17,100.57
Ten of the index’s 11 major sectors were higher.
The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.2 per cent as gold futures fell.
Leading the index were Hudson's Bay Co., up 12.7 per cent, Aurora Cannabis Inc., up 4.4 per cent, and ARC Resources Ltd., higher by 4 per cent.
Lagging shares were TMX Group Ltd., down 4.5 per cent, Semafo Inc., down 2.5 per cent, and Yamana Gold Inc., lower by 2.5 per cent.
Wall Street’s main indexes closed at record levels for a third straight day in a muted volume session on Wednesday ahead of the Thanksgiving holiday, as fresh data pointed to an economy on solid footing, while investors remained cautiously optimistic about a resolution to U.S.-China trade tensions.
The Dow Jones Industrial Average rose 44.15 points, or 0.16 per cent, to 28,165.83, the S&P 500 gained 13.2 points, or 0.42 per cent, to 3,153.72 and the Nasdaq Composite added 57.24 points, or 0.66 per cent, to 8,705.18
The pan-European STOXX 600 index rose 0.32 per cent while earlier in Asia Japan’s Nikkei rose 0.28 per cent and most other Asian markets gained on hopes of a trade deal.
Chinese shares fell as weak industrial profit data highlighted growing strains on China’s economy.
Adding to optimism was data showing U.S. economic growth picked up slightly in the third quarter, rather than slowing as initially reported in October, and other data indicated U.S. consumer spending rose steadily last month.
Two other U.S. economic reports showed orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.2 per cent in October while initial claims for state unemployment benefits declined.
The dollar index rose 0.13 per cent, with the euro down 0.15 per cent to $1.1001.
The Japanese yen weakened 0.47 per cent versus the greenback at 109.58 per dollar.
Sterling continued to wobble as pre-election opinion polls showed some narrowing of British Prime Minister Boris Johnson’s Conservatives lead over opposition parties, even though he remains favoured to gain an overall majority.
Kay Van-Petersen, global macro strategist at Saxo Capital Markets in Singapore, said while trade hopes might be driving some tactical, near-term moves in the market, they were mostly just “noise.” The Federal Reserve policy is more important.
The broader market direction is “about the accommodative Fed and accommodative monetary policy and the fact that structurally the meta-trend is still lower in yields and rates,” he said.
China had seized on the plunge in borrowing costs to issue its biggest international bond ever on Tuesday.
The benchmark 10-year U.S. Treasury note fell 8/32 in price to lift its yield to 1.7671 per cent.
In Europe, core European government debt yields rose slightly, with yields on benchmark German 10-year bonds pushing above one-month lows.
Benchmark German 10-year bond yields traded at -0.371 per cent, holding above a November low of -0.384 per cent.
U.S. gold futures settled 0.5 per cent lower at $1,453 per ounce, heading for its worst month in almost three years after a 3.5-per-cent drop.
Oil eased on Wednesday after a report showing U.S. crude inventories grew unexpectedly last week, while gasoline stocks surged and production hit another record.
Losses were limited by optimism that a U.S.-China trade deal would be reached soon.
Brent crude futures settled at $64.06 a barrel, down 21 cents. U.S. West Texas Intermediate crude settled at $58.11 a barrel, shedding 30 cents.
WTI trade volumes lower ahead of the U.S. Thanksgiving holiday, with lots of front-month contracts trading down about 5 per cent compared with the previous session.
U.S. crude stocks swelled by 1.6 million barrels last week as production hit a record high at 12.9 million barrels per day and refinery runs slowed, the Energy Information Administration said. Analysts in a Reuters poll had forecast a drop of 418,000 barrels.
The more bearish news from the EIA was that U.S. gasoline inventories soared 5.1 million barrels, compared with expectations for a 1.2 million-barrel gain.