Global stocks and the euro rallied on Friday on signs of progress in U.S.-China trade talks and hopes that Britain was moving closer to a smooth exit from the European Union.
The MSCI world equity index was on track for its first weekly rise in four. Frankfurt’s main stock index, seen as sensitive to trade wars because of its export-oriented components, ended up 2.9 per cent for its biggest daily gain since January 4.
The improved appetite for riskier assets carried from Thursday and improved after U.S. President Donald Trump said “good things” were happening during high-level China-U.S. trade talks and spoke of “warmer feelings.”
U.S. officials signaled good news was coming after a second day of trade talks with China ended, boosting investor hopes that the world’s two largest economies would agree to cool the fires of their 15-month tariff war.
However, investors said they were hoping for, at best, a deal limited in scope, and noted that rhetoric had in the past failed to translate into meaningful moves.
“We have been here before, where we have seen positive talk. It’s possible they will be able to do a smaller deal around tariffs, where there is some room for movement,” said Mike Bell, global market strategist at J.P. Morgan Asset Management.
Sterling jumped nearly 2 per cent versus the dollar for a second day, putting it on track for its largest weekly gain in more than two years after the EU Brexit negotiator reported a “constructive” meeting with his British counterpart.
Sterling was last trading at $1.2657, up 1.74 per cent.
Canada’s main stock index finished flat despite robust domestic jobs data.
The Toronto Stock Exchange’s S&P/TSX composite index was unofficially down 7.52 points, or 0.05 per cent, at 16,415.16.
Five of the index’s 11 major sectors were higher.
The energy sector climbed 1.9 per cent on the back of higher oil prices, lifted by a report of an attack on an Iranian oil tanker.
Energy stocks also got a boost from shares of Tourmaline Oil Corp, which jumped 11 per cent and were the largest percentage gainers on the TSX, after the company announced it would form a infrastructure energy company called Topaz Energy Corp.
The financials sector gained 0.7 per cent and the industrials sector 0.3 per cent.
The materials sector, which includes precious and base metals miners, lost 2.4 per cent, as demand for riskier bets dented demand for gold. Utilities were down 1.2 per cent.
The Canadian dollar strengthened to a one-month high against its U.S. counterpart on Friday after domestic data showing a much bigger-than-expected jobs gain in September supported bets for the Bank of Canada to keep interest rates on hold this month.
The Canadian economy added 53,700 jobs in September, the second straight month of robust jobs gains, Statistics Canada data showed. Analysts had forecast a gain of 10,000 jobs
“A huge labour market print has helped the loonie take more ground against the U.S. dollar today,” Simon Harvey, FX market analyst for Monex Europe and Monex Canada, said in a note. “Markets are now pricing a Bank of Canada rate cut at the end of the month as a slim probability.”
Chances of a Bank of Canada interest rate cut at the October 30 policy decision dipped to 7 per cent from 9 per cent before the data, the overnight index swaps market indicated.
The central bank has kept its benchmark rate on hold at 1.75 per cent this year even as other central banks, including the Federal Reserve and the European Central Bank, have eased.
The Canadian dollar was trading 0.8 per cent higher at 1.3184 to the greenback, or 75.85 U.S. cents. The currency, which was up 0.9 per cent for the week, touched its strongest intraday level since Sept. 11 at 1.3171.
Stocks on Wall Street followed Asia and Europe.
“Over the last couple of months, we have seen (companies)taking a hit from the uncertainty around trade and markets will be looking for any clues to remove that,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
“It is still going to be a one step forward, two steps backward tone with the (trade) talks, but there are hopes of a de-escalation.”
The Dow Jones Industrial Average rose 317.65 points, or 1.2 per cent, to 26,814.32, the S&P 500 gained 31.88 points, or 1.09 per cent, to 2,970.01 and the Nasdaq Composite added 106.27 points, or 1.34 per cent, to 8,057.04.
The pan-European STOXX 600 index rose 2.31 per cent and MSCI’s gauge of stocks across the globe gained 1.77 per cent.
Emerging market stocks rose 1.82 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.81 per cent higher, while Japan’s Nikkei rose 1.15 per cent.
The Federal Reserve said it would begin buying about $60 billion per month in Treasury bills to ensure “ample reserves” in the banking system, a program that will continue at least until the second quarter of 2020.
The dollar fell toward its session lows after the Fed announcement.
The dollar index fell 0.38 per cent, with the euro up 0.31 per cent to $1.1038.
The Japanese yen weakened 0.46 per cent versus the greenback at 108.50 per dollar as its global safe-haven luster faded.
In commodities, oil prices rose after Iranian media said a state-owned oil tanker had been attacked in the Red Sea near Saudi Arabia, raising the prospect of supply disruptions, but bearish oil demand forecasts are seen keeping a lid on gains.
U.S. crude rose 2.35 per cent to $54.81 per barrel and Brent was last at $60.58, up 2.5 per cent on the day.
The Fed announcement triggered a steepening of the U.S. yield curve, with the spread between 10-year and three-month yields on track to end the session in positive territory for the first time since May.
Benchmark 10-year notes last fell 29/32 in price to yield 1.7552 per cent, from 1.656 per cent late on Thursday.
The 2-year note last fell 6/32 in price to yield 1.6199 per cent, from 1.53 per cent late on Thursday.
Reuters