A truce in the U.S.-China trade war boosted global stocks to their highest in roughly three weeks on Monday, while sending the U.S. dollar lower and the Chinese yuan and several trade-dependent currencies higher.
The rally in equities follows an agreement between Washington and Beijing at the G20 summit in Argentina on Saturday that calls for a 90-day trade tariff truce. Oil prices jumped more than 3 per cent.
“Today is mostly about celebrating the fact that the U.S. and China have delayed what could have been the some of the worst-case scenarios regarding their trade relations,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Canada’s main stock index rose on Monday, led a rally in energy shares.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 77.16 points, or 0.51 per cent, at 15,274.98.
The energy sector jumped 4 per cent, the most among the major sectors trading higher. Cenovus Energy Inc. was up 11.9 per cent, while Canadian Natural Resources Ltd. rose 9.5 per cent.
The materials sector, which includes precious and base metals miners and fertilizer companies, increased 2.2 per cent as gold futures rose. First Quantum Minerals Ltd. jumped 11.4 per cent, while Teck Resources Ltd. increased 4.8 per cent.
Lagging shares were Aphria Inc., down 27.7 per cent on a joint short-seller report , Gibson Energy Inc., down 7.5 per cent, and BRP Inc., lower by 6.0 per cent.
Wall Street’s major indexes rallied on Monday following a truce between the United States and China in their trade war, which has clouded the outlook for the stock market for much of the year.
The Dow Jones Industrial Average rose 287.97 points, or 1.13 per cent, to 25,826.43, the S&P 500 gained 26.05 points, or 0.94 per cent, to 2,786.22 and the Nasdaq Composite added 99.26 points, or 1.35 per cent, to 7,429.79.
The pan-European STOXX 600 index rose 1.03 per cent.
U.S. President Donald Trump said China has agreed to “reduce and remove” tariffs below the 40 percent level currently charged on U.S.-made vehicles. That helped boost shares of European automakers more than 3 percent.
The White House also said the existing 10-per-cent tariffs on $200-billion worth of Chinese goods would be increased to 25 percent if no deal was reached within 90 days.
MSCI’s all-country world index climbed 0.25 per cent, its sixth straight daily gain.
The U.S. dollar fell broadly as currencies battered by trade tensions staged a comeback.
“The G20, the dinner in particular, has ignited quite a robust risk rally and that’s coming at the dollar’s expense,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.
China’s offshore yuan gained about 1 per cent to 6.8796. The Australian dollar, viewed as a barometer of Chinese growth, was 0.5 per cent higher against the greenback.
The New Zealand dollar gained 0.6 per cent, while the U.S. dollar lost 0.6 percent against the Canadian dollar.
Sterling gave up early gains and dived to its lowest since the end of October as investors dumped the currency on growing concerns about British parliamentary approval for a Brexit deal.
“Until the British parliament votes on the deal next week we are going to see a steady drum beat of Brexit headlines, which is going to keep the pound weak,” Danske Bank strategist Morten Helt said. Lawmakers are to vote Dec. 11 on Prime Minister Theresa May’s agreement on leaving the European Union.
U.S. Treasury yields rose after the U.S.-China deal boosted stocks and reduced demand for safe-haven U.S. debt, but they reversed course at midday as risk appetite faded.
Germany’s 10-year government bond, the benchmark for the euro area, initially rose four basis points to 0.347 per cent , then eased back to 0.3 per cent.
Yields on riskier southern European bonds were down across the board. Italian bond yields hit their lowest level in just over two months on reports that Rome was negotiating a lower budget deficit with the EU and a new capital key from the European Central Bank.
Oil prices jumped nearly four per cent on Monday after the United States and China agreed to a 90-day truce in a trade dispute and Alberta ordered a production cut, while exporter group OPEC looked set to reduce supply.
Both benchmarks surged more than 5 per cent earlier in the session.5-per-cent gain. U.S. West Texas Intermediate (WTI) crude futures gained $2.02 to settle at $52.95 a barrel, a 3.97-p er-cent increase.
Both benchmarks surged more than 5 percent earlier in the session.
China and the United States agreed during a weekend meeting in Argentina of the Group of 20 leading economies not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing disputes.
The trade war between the world’s two biggest economies has weighed heavily on global trade and sparked concerns of an economic slowdown.
Crude oil has not been included in the list of products facing import tariffs, but traders said the positive sentiment was supporting crude markets.
“Initial signs of the U.S.-China trade relation on the mend have provided a boost to oil prices in today’s trading session. Nevertheless, whether the momentum will sustain hinges on tangible outcomes from the negotiations,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
Oil also received support from an announcement by Alberta that the province will force producers to cut output by 8.7 per cent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage.
The Organization of the Petroleum Exporting Countries meets on Thursday to decide output. The group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a glut that has pulled down crude prices by around a third since October.