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An index of world stock markets edged higher on Thursday as worries over the lack of clear signs of a resolution to the U.S.-China trade spat were offset by an assurance by Federal Reserve Chairman Jerome Powell that the U.S. central bank has the ability to be patient on monetary policy.

The dollar rebounded after hitting a three-month low, while U.S. Treasury prices erased early gains after a soft 30-year bond auction and as Powell said the U.S. central bank will “substantially” reduce the size of its balance sheet.

MSCI’s all-country index, which came under some pressure after U.S. stocks briefly retreated following Powell’s comments on the Fed balance sheet, recovered to trade up 0.11 per cent on the day. Thursday marked the index’s fifth straight session of gains.

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Speaking at the Economic Club of Washington, Powell reiterated that the U.S. central bank has the ability to be patient on monetary policy given stable price measures. He downplayed predictions from policymakers suggesting interest rates would be raised twice more this year.

“The stock market is wanting to hear dovish speak from the Fed, whether it’s Powell or the governors or the presidents,” said Willie Delwiche, investment strategist at Baird in Milwaukee.

Stocks around the globe started Thursday weaker after China said three days of talks with the United States that wrapped up on Wednesday had established a “foundation” to resolve differences. But it gave few details on key issues at stake, including a scheduled U.S. tariff increase on $200 billion worth of Chinese imports.

The trade war between the two economic giants has disrupted the flow of hundreds of billions of dollars of goods.

Canada’s main stock index extended its rally to a fifth day amid broad-based gains

The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed up 98.76 points, or 0.67 per cent, at 14,903.49.

Ten of the index’s 11 major sectors were higher on the day, led by a 4.3-per-cent jump in health care stocks.

Canopy Growth Corp. was up 12 per cent, while rival Aurora Cannabis Inc. jumped 9.9 per cent.

Reversing an early decline, the energy sector rose 1.1 per cent. Vermilion Energy Inc. increased 3.5 per cent, while Encana Corp. finished 2.5 per cent higher.

Materials stocks lost 0.4 per cent with First Quantum Minerals Ltd. falling 2.6 per cent and Pan American Silver Corp. declining 2.3 per cent.

Leading the index were New Gold Inc., up 6.7 per cent and Laurentian Bank of Canada, up 6.3 per cent.

Lagging shares were Kirkland Lake Gold Ltd., down 4.7 per cent, Semafo Inc., down 4.3 per cent, and Sandstorm Gold Ltd., lower by 3.7 per cent.

Wall Street extended its rally into a fifth straight day on Thursday in a session of whipsaw trading as investors responded to mixed comments by Powell, while a warning from Macy’s pummeled retail stocks.

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“That’s what spooked the market a little bit. It’s more of a commentary on the entire economy as a whole,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.

The S&P 500 is up over 10 per cent from a 20-month low it touched around Christmas, lifted by hopes for a U.S.-Chinese trade deal, which eased some worries over the impact of the dispute on global growth. The benchmark index’s five-day winning streak is its longest since September.

Trade-related optimism faded somewhat as China offered little in the way of details on key issues such as forced technology transfers, intellectual property rights, tariff barriers and cyber attacks.

In the United States, reports from Macy’s and American Airlines added to concerns that growth of corporate profits would slow.

Macy’s Inc stock plunged 17.69 per cent and pulled down other retailers after the department store operator cut its same-store sales forecast for the full year because of weak demand during mid-December.

S&P 500 companies on average are seen posting 14.5-per-cent growth in earnings per share as they report December-quarter results over the next few weeks, according to IBES data from Refinitiv. However, expectations for growth in 2019 are at 6.4 percent, down from an expectation of 7.3 per cent on Jan 1.

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“It could be a good quarter, but maybe with more cautious outlooks until we get something that comes out of the trade negotiations,” said Kurt Brunner, a portfolio manager at Swarthmore Group in Philadelphia. “There is a lot of uncertainty there.”

The Dow Jones Industrial Average climbed 0.51 perc ent to end at 24,001.92 points, while the S&P 500 gained 0.45 per cent to 2,596.63.

The Nasdaq Composite added 0.42 per cent to 6,986.07.

Trade-sensitive industrial stocks rose 1.44 per cent, lifted by Boeing Co, which gained 2.55 per cent after the U.S. Air Force accepted its long-delayed KC-46 air tanker.

American Airlines Group Inc fell 4.13 per cent after the No. 1 U.S. carrier cut its fourth-quarter profit and unit revenue forecasts. That weighed on other airline shares as well.

Ten out of 11 S&P sector indexes rose, led by a 1.55-per-cent increase in real estate, with consumer discretionary ending down 0.23 per cent.

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The pan-European STOXX 600 benchmark closed up 0.34 per cent.

U.S. Treasury prices erased early gains and benchmark 10-year notes shed 2/32 in price to yield 2.7314 per cent, up from 2.728 per cent late Wednesday.

The dollar rallied from three-month lows, with investors reducing bearish positions on the currency as they awaited resolution in the U.S.-China trade negotiations, the U.S. government shutdown and Britain’s exit from the European Union.

The dollar index, tracking it against a basket of six major currencies, rose 0.35 percent to 95.549, after earlier dropping to a three-month trough.

In commodity markets, oil prices clung to their recent gains.

Brent crude futures rose 24 cents to settle at $61.68 a barrel, a 0.39-per-cent gain. U.S. West Texas Intermediate (WTI) crude futures rose 23 cents to settle at $52.59 a barrel, a 0.44-per-cent gain.

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Both benchmarks rose by around 5 per cent the previous day.

Gold steadied near a more than six-month peak on Thursday, with spot gold little changed at $1,286.98 per ounce.

Reuters

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