Global stock markets jumped at the start of 2020 as a shot of Chinese stimulus drove a gauge of world equity performance to a record high.
Gold climbed to a three-month peak while yields on U.S. Treasuries and Germany’s 10-year bond tumbled on optimism about the world economy after positive Chinese manufacturing data took an edge off fixed income’s safe-haven status.
News that China’s central bank was freeing another 800 billion yuan ($115 billion) to prop up a slowing economy added to the outlook for economic growth, which has been fueled by easing U.S.-Sino trade tensions.
China’s factory activity expanded at a slower clip in December, pulling back from a three-year high the previous month as new orders softened, but production continued to grow at a solid pace and business confidence shot up.
The Caixin/Markit Manufacturing Purchasing Managers’ Index for December eased to 51.5 from 51.8 in November, but it remained above the 50-mark that separates expansion from contraction for the fifth straight month.
In another piece of positive data, the number of Americans filing claims for jobless benefits edged lower last week, a positive for the U.S. labor market with recent signs new claims may be trending slightly higher.
“It still feels like this continuation of the surge that happened toward year-end in 2019,” said Ken Polcari, senior market strategist at SlateStone Wealth LLC in Jupiter, Florida.
“You did have some good Chinese data that came out overnight, a positive manufacturing PMI, which is very expansionary and helping fuel the rally.”
In Toronto, the S&P/TSX composite index was up 36.52 points, or 0.21 per cent, at 17,099.95.
Four of the TSX’s 11 major sectors were trading higher.
The financials sector gained 0.6 per cent, while the industrial and tech sectors rose 1.2 per cent and 1.5 per cent, respectively.
The energy sector was down 0.6 per cent, while the materials sector, which includes precious and base metals miners and fertilizer companies, dipped 0.4 per cent.
Leading the index were Ballard Power Systems Inc., up 11.2 per cent, NFI Group Inc., up 5.9 per cent, and Enghouse Systems Ltd., higher by 5 per cent.
Lagging shares were Aurora Cannabis Inc., down 5.7 per cent, Canopy Growth Corp., down 4.8 per cent, and Aphria Inc., lower by 4.6 per cent.
MSCI’s gauge of stocks across the globe gained 3.14 points, or 0.56 per cent, to set an all-time high, while the pan-European STOXX 600 index rose 0.93 per cent.
The double dose of Chinese news helped Europe’s main markets in London, Frankfurt and Paris jump 0.82 per cent to 1.06 per cent, outpacing overnight gains in Asia and setting them on course for their best opening day of a year since 2013.
Wall Street’s major indexes notched record highs to open the new year on Thursday, as fresh economic stimulus from China added to optimism fueled by easing trade tensions and an improving global outlook.
The Dow Jones Industrial Average rose 331.51 points, or 1.16 per cent, to 28,869.95, the S&P 500 gained 27.17 points, or 0.84 per cent, to 3,257.95 and the Nasdaq Composite added 119.59 points, or 1.33 per cent, to 9,092.19.
Emerging market stocks rose 1.17 per cent, as the Bovespa index in Brazil advanced 2.2 per cent to an all-time high. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.9 per cent higher.
China’s blue-chip CSI300 index, one of the world’s best performers last year, rose 1.4 per cent, reaching its highest since Feb. 7, 2018. Hong Kong’s Hang Seng added 1.25 per cent.
Alibaba Group Holding Ltd rose 3.4 per cent on news that China’s Ant Financial, an affiliate of the e-commerce giant, has joined the race for a digital banking license in Singapore, the company said in a statement.
Gold prices were boosted by doubts about the lasting strength of Wall Street’s stock rally, said Jeffrey Christian, managing partner of CPM Group.
“There is nervousness about why the stock markets are as high as they are, given the economical and political environment,” Christian said.
U.S. gold futures settled 0.3 per cent higher at $1,528.10 an ounce. Spot gold hit a three-month high of $1,531.20.
The dollar recovered from a six-month low after a downbeat December left an index that tracks the greenback versus a basket of six major trading currencies almost flat at the end of 2019.
The dollar index rose 0.45 per cent, with the euro down 0.37 per cent to $1.1168. The Japanese yen strengthened 0.17 per cent versus the greenback at 108.52 per dollar.
Sterling was on track for its biggest daily loss in two weeks as euphoria after last month’s UK election gave way to anxiety over the risk of a no-deal Brexit at the end of 2020.
The pound was last trading at $1.3138, down 0.88 per cent on the day.
Benchmark 10-year U.S. Treasury notes rose 10/32 in price to yield 1.8754 per cent.
Germany’s 10-year bond yield briefly hit -0.16 per cent on optimism better U.S.-China trade relations will spur global growth, denting safe-haven assets.
The yield on the bund, a benchmark for European lending, soon slid to -0.23 per cent.
Oil prices steadied after early gains as signs of improving U.S.-China trade relations eased demand concerns and rising tensions in the Middle East provided support.
Brent crude futures settled up 25 cents at $66.25 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 12 cents to settle at $61.18 a barrel.
Reuters