Broad gains in the U.S. equity market boosted a measure of global stock markets on Tuesday after President Donald Trump said a “great deal” could be struck with China that would relieve fears of a growing trade war between the world’s two largest economies.
MSCI’s gauge of stocks across the globe gained 1 per cent. Still, the index is down nearly 9 per cent for the month.
Investors remained cautious despite the modest gains.
“At this point, nobody can say the equity market is bottoming out. Global investor sentiment remains shaky,” said Yasuo Sakuma, chief investment officer at Libra Investments in Tokyo.
Market participants also kept their hopes in check regarding trade.
“We don’t see the trade war being resolved any time soon,” said Rabobank’s senior macroeconomic strategist Teeuwe Mevissen. “And it comes at a time when we see all the sentiment indicators in the euro zone but also in the U.S., too, cooling down.”
Trump said during an interview with Fox News late on Monday that he thought there could be an agreement with China on trade. But he also said he had billions of dollars worth of new tariffs ready to be imposed if a deal was not possible.
The Dow Jones Industrial Average rose 431.96 points, or 1.77 per cent, to 24,874.88, the S&P 500 gained 41.39 points, or 1.57 per cent, to 2,682.64 and the Nasdaq Composite added 111.36 points, or 1.58 per cent, to 7,161.65.
The gains were broad in the U.S., with all 11 sectors of the benchmark S&P index up for the day. Trade-sensitive industrial shares rose 2 per cent.
General Electric Co, however, fell 8.3 per cent. GE slashed its quarterly dividend to a penny a share, promised to restructure its power unit and said it faced a deeper accounting probe.
Canada’s main stock index also traded higher on Tuesday, led by gains in industrial stocks.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 172.75 points, or 1.2 per cent, at 14,894.50.
Industrials led the way, rising 2.8 per cent. Canadian Pacific Railway Ltd. jumped 3.9 per cent, while Canadian National Railway Co. was up 3.7 per cent.
The heavyweight financial sector rose 1.3 per cent. Its gains were led by Manulife Financial Corp., which finished up 5.8 per cent after saying it would ask a court in Saskatchewan to dismiss claims made against it by a hedge fund.
Sun Life Financial Inc. increased 1.9 per cent, while Royal Bank of Canada and Bank of Montreal rose 1.5 per cent and 1.4 per cent, respectively.
Marijuana producers pushed health care stocks higher by 2 per cent. Aphria Inc. rose 4.2 per cent, while Aurora Cannabis Inc. and Canopy Growth Corp. increased 3.5 per cent and 2.2 per cent, respectively.
Meanwhile, data showed the Italian economy had ground to a halt in the third quarter as both domestic demand and trade flows failed to spur growth.
The flat reading was the weakest since the fourth quarter of 2014 and renewed pressure on Italy’s government debt in the bond markets.
The pan-European STOXX 600 index rose 0.01 per cent.
The chill around China and global trade left emerging- market stocks at an 18-month low, with MSCI’s index down for a sixth day in a row.
Oil prices dropped more than 1 per cent on Tuesday on signs of rising supply and concern that global economic growth and demand for fuel will fall victim to the U.S.-China trade war.
Brent crude futures fell $1.43 to settle at $75.91 a barrel, a 1.85-per-cent decline. U.S. West Texas Intermediate (WTI) crude futures fell 86 cents to settle at $66.18 a barrel, a 1.28-per-cent drop.
Earlier in the session, Brent reached a session low of $75.09 a barrel, the lowest since Aug. 24. WTI slumped to $65.33 a barrel, the weakest since Aug. 17.
Both contracts have fallen about $10 a barrel from four-year highs reached in the first week of October.
Prices were pressured as U.S. inventories were expected to rise for a sixth straight week as other top producers Saudi Arabia and Russia signaled potential output increases.