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An index of world stocks rose on Monday, adding to Friday’s strong gains, on optimism about the outcome of trade talks between Washington and Beijing.

Growing bets the Federal Reserve will halt its multi-year rate-hike cycle sent the dollar lower across the board, while rising equity markets and support from OPEC production cuts helped lift oil prices.

MSCI’s world equity index, which tracks shares in 47 countries, rose 0.88 per cent, its highest level since Dec. 19.

The resumption of U.S.-China trade talks helped eased concerns On Wall Street about the fallout from an extended trade war between the world’s two largest economies. Technology and consumer discretionary shares led gains.

U.S. officials are meeting their counterparts in Beijing this week for the first face-to-face talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed in December to a 90-day truce in a trade war that has roiled global markets.

U.S. Commerce Secretary Wilbur Ross predicted on Monday that Beijing and Washington could reach a trade deal that “we can live with.”

“The main thing is the administration’s implied progress on talks with China. That’s something that the market sees as very important,” said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

Canada’s main stock index continued to rise on Monday, after notching two weeks of gains, as advances in healthcare and tech stocks offset a drop in materials shares.

The Toronto Stock Exchange’s S&P/TSX composite index unofficially finished up 77.51 points, or 0.54 per cent, at 14,497.81.

The tech sector rose 2.4 per cent, the most among 11 TSX sectors. Constellation Software Inc. jumped 4.5 per cent, while Shopify Inc. increased 3.8 per cent.

Health care stocks were up 2.2 per cent. Aphria Inc. finished 5.8 per cent higher, while Cronos Group Inc. and Bausch Health Companies Inc. rose 4.4 per cent.

Conversely, materials stocks fell 1 per cent. Kinross Gold Corp. was down 3.4 per cent, while First Quantum Minerals Ltd. dipped 3.2 per cent.

The Canadian dollar strengthened to a one-month high against its broadly weaker U.S. counterpart on Monday, as oil prices climbed and some investors bet the Bank of Canada will stick this week to its plan to raise interest rates to a neutral range.

The Bank of Canada, which has hiked five times since July 2017 to leave its benchmark interest rate at 1.75 per cent, is widely expected to refrain from further tightening on Wednesday following recent volatility in stock markets and the price of oil, one of Canada’s major exports.

Still, the central bank said as recently as last month that it will need to raise rates further to a neutral range of between 2.50 per cent and 3.50 per cent to achieve its inflation target.

“I think there are people thinking that the bank will stick to its guns a little bit, at least in terms of eventually getting back to neutral, and if so that should be supportive of the currency,” said Mark Chandler, head of Canadian fixed income and currency strategy at RBC Capital Markets.

Domestic data showed a surprise pick-up in the pace of purchasing activity in December. The Ivey Purchasing Managers Index rose to 59.7 from 57.2 in November, surpassing analysts’ expectations for 56.8.

The Canadian dollar was trading 0.6 per cent higher at 1.3296 to the greenback, or 75.21 U.S. cents. The currency, which rose nearly 2 per cent last week, touched its strongest level since Dec. 7 at 1.3280.

On Wall Street, The Dow Jones Industrial Average rose 98.19 points, or 0.42 per cent, to close at 23,531.35, the S&P 500 gained 17.75 points, or 0.70 per cent, to finish at 2,549.69 and the Nasdaq Composite added 84.61 points, or 1.26 per cent, to end at 6,823.47.

The gains extended Friday’s rise following robust U.S. employment data and a message from the Federal Reserve that it would be patient and flexible in policy decisions this year.

On Friday, Fed Chairman Jerome Powell told the American Economic Association that the U.S. central bank is not on a preset path of interest rate hikes and that it will be sensitive to the downside risks markets are pricing in.

European shares edged lower on Monday amid lingering worries about the euro zone economy and Brexit. The pan-European STOXX 600 finished down 0.15 per cent.

In currency markets, the dollar index, which tracks the greenback versus the euro, yen, sterling and three other currencies, was down 0.49 per cent at 95.709 amid the diminished expectations for further U.S. rate hikes.

“This is just the re-pricing of U.S. rate hikes going forward. That has been the story for a couple of weeks,” said John Doyle, director of markets at Tempus Inc in Washington.

Interest rate futures traders are now pricing in a chance of a small rate cut this year, while the Fed has indicated that two rate hikes are likely.

Gold rose and palladium hit a record high as the weaker dollar spurred demand for the metals from holders of other currencies. Spot gold was up 0.3 per cent at $1,288.7 per ounce.

U.S. Treasury prices fell on Monday, extending losses from Friday, as investors evaluated the likelihood of further Federal Reserve rate hikes this year and as the United States and China resumed trade talks.

Benchmark 10-year notes fell 6/32 in price to yield 2.680 per cent, up from 2.659 per cent on Friday.

Oil prices edged higher on Monday, rebounding further from 1-1/2-year lows reached in December, on support from OPEC production cuts and steadying equities markets.

Brent crude futures rose 27 cents to settle at $57.33 a barrel, a 0.47-per-cent gain. U.S. West Texas Intermediate (WTI) crude futures rose 56 cents to settle at $48.52 a barrel, a 1.17-per-cent gain.

Reuters

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