World equity markets rebounded more than 1% on Thursday after U.S. Senate leaders reached a deal to raise the U.S. debt ceiling, while a global easing in energy prices tempered deepening fears of “stagflation.”
European bourses rallied off 2-1/2-month lows and Wall Street also jumped as steady crude oil and natural gas prices offered relief after a shock 4% drop in German industrial production highlighted supply chain disruptions.
But the number of Americans filing new claims for jobless benefits fell the most in three months last week, suggesting the U.S. labour market recovery was regaining momentum after a recent slowdown as COVID-19 infections subside.
Canada’s main stock index rose on Thursday, with energy stocks jumping with oil prices and technology stocks tracking gains in the Nasdaq, as global sentiment was lifted by hopes that Washington could resolve its debt-ceiling standoff.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially up 224.55 points, or 1.11%, at 20,416.21.
The Canadian equity index has gained nearly 17% so far this year on hopes of a steady economic recovery, but recently lost steam due to concerns around higher inflation which could derail global economic growth.
Toronto-listed technology stocks gained 2.7% for their third session of gains.
The energy group gained 2.4%, a day after the sub-sector index recorded its worst session in over two weeks.
Oil futures rebounded on Thursday, as the market deemed it unlikely that the United States would release emergency crude reserves or ban exports to ease tight supplies.
Brent futures rose 87 cents, or 1.1%, to settle at $81.95 a barrel, while U.S. crude gained 87 cents, or 1.1%, to settle at $78.30 a barrel. Earlier in the day prices at both benchmarks dropped $2 a barrel.
The U.S. Department of Energy said all “tools are always on the table” to tackle tight energy supply conditions in the market.
The department made the comment amid questions about whether President Joe Biden’s administration is considering tapping into its Strategic Petroleum Reserves (SPR) or pursuing a ban on oil exports to bring down the cost of crude oil.
Wall Street ended sharply higher on Thursday in a broad-based rally led by heavyweight technology shares, as a truce in the debt-ceiling standoff in the U.S. Congress relieved concerns of a possible government debt default this month.
Mega-cap stocks, including Apple, Amazon and Microsoft, jumped and were the biggest boosts to the S&P 500 and Nasdaq.
The U.S. Senate took a step toward passing a $480 billion increase in Treasury Department borrowing authority, which would put off another partisan showdown until December.
Uncertainty over the debt-ceiling negotiations was one concern investors cited in September as the S&P 500 logged its biggest monthly percentage drop since the onset of the coronavirus pandemic in March 2020.
“Today’s (market) is driven by a slight move in Washington towards rationality about being able to pay their bills, write some checks,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
Meanwhile, data showed the number of Americans filing new claims for jobless benefits dropped last week by the most in three months, suggesting the labor market recovery was regaining momentum as the latest wave of COVID-19 infections began to subside.
The closely watched monthly U.S. jobs report is due on Friday.
“Today’s numbers reinforce the expectation that employment will take a significant step up in the coming months, and I think that’s positive for the economy,” said Brad Neuman, director of market strategy at Alger.
“The market climbed its wall of worry today as fears of a debt-ceiling impasse receded and hopes for an acceleration in employment gains were reinforced.”
Unofficially, the Dow Jones Industrial Average rose 1% to end at 34,760.34 points, while the S&P 500 gained 0.83% to 4,399.82.
The Nasdaq Composite climbed 1.04% to 14,653.38.
The S&P 500 materials and consumer discretionary indexes were among the strongest performers of 11 sectors.
U.S.-traded Chinese stocks including Alibaba Group Holding and Tencent Holdings surged as concerns around U.S.-Sino trade relations and Evergrande’s debt crisis appeared to ease.
Investors will soon turn their attention to third-quarter earnings reports that start to arrive in earnest next week. Analysts on average estimate S&P 500 companies’ earnings per share rose 29% in the third quarter, according to Refinitiv.
Levi Strauss & Co shares jumped after the jeans maker beat third-quarter revenue and profit estimates.
Stagflation fears are overdone, and investors are overly focused on weaker economic growth and higher inflation though the long-term market trend is higher, said Bill Sterling, global strategist at GW&K Investment Management.
“The journey ultimately is to a global expansion that continues intact, which recently has had this stagflation tinge to it,” he said.
The U.S. Senate took a step toward passing a $480 billion increase in Treasury Department borrowing authority, a move that would avert a catastrophic debt default later this month but set up another partisan showdown in early December.
MSCI’s all-country world index rose 1.5%, while the broad STOXX Europe 600 index closed up 1.6%.
Some of the negative pressures have been mitigated as investors reduced positions on concerns about a “what if” scenario concerning the debt ceiling, said Michael James, managing director of equity trading at Wedbush Securities.
“There’s still a number of black clouds hanging over the market, but the skies have cleared up a little bit in the last two days,” James said.
Euro zone bond yields fell as energy prices declined, recovering from a sharp sell-off in debt markets a day earlier that had been driven by inflationary concerns.
Yields on the benchmark German 10-year bund slid 0.3 basis point to -0.187%.
U.S. Treasury yields rose as traders awaited U.S. employment data for September on Friday. Volatility at the shortest end of the curve eased in the wake of a potential plan to avoid a default on government debt this month.
The benchmark 10-year U.S. Treasury yield was last up 4.5 basis points at 1.5654%.
U.S. gold futures settled down 0.2% at $1,759.20 an ounce.
Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan closed up 1.8%, its biggest one-day rise since August.
Hong Kong led Asia’s gains with a 3% bounce off a year low. South Korea’s Kospi gained 1.8% and Japan’s Nikkei firmed 0.5% to snap eight days of losses.
U.S.-listed Chinese stocks jumped, mirroring a rally in Hong Kong shares and as concerns about U.S.-Sino trade relations and Evergrande’s debt crisis appeared to ease.
IShares China Large-Cap ETF and iShares MSCI China ETF both rose about 4.0%, while e-commerce giant Alibaba was on track for biggest one-day gain since April.
The dollar eased from 12-month highs hit last month against a basket of currencies and held at a 14-month high against the euro.
The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.01% to 94.214.
The euro was down 0.05% at $1.1550, while the yen traded up 0.19% at $111.6200.
Reuters
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