Stocks in Europe and Wall Street rose on Tuesday on strong U.S. corporate results and a possible deal to avoid a disorderly British exit from the European Union, while oil prices fell as weak China data kindled global economic fears.
Media reports quoting EU officials as saying negotiators were close to a Brexit deal triggered a late afternoon rally across European equity markets and helped further lift Wall Street gains built on strong earnings reports.
Sterling rose to its highest level against the dollar and the euro since May after Bloomberg said British and EU negotiators were closing in on a draft Brexit deal.
Optimism over a Brexit breakthrough led the benchmark FTSE 100 stock index in London, which usually suffers from a pound rally, to pare most losses and end barely lower.
The pound has strengthened nearly 5 per cent over the past week as investors rushed to reprice the prospect of a last-minute Brexit deal before the Oct. 31 deadline.
The jump in stocks eased ongoing concerns about the impact of the prolonged U.S.-China trade war on global growth though investors held out hope the dispute could also be resolved.
“If we can resolve the China trade issue and have a reasonably good resolution to the Brexit issue with the UK, it adds a sense of optimism to the market. Combine that with the earnings today being good and happy days are here again,” said Rick Meckler, a partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.
Canada’s main stock index finished flat Tuesday, led by gains in the shares of cannabis company Aphria and miner Wesdome Gold following their upbeat quarterly results.
The Toronto Stock Exchange’s S&P/TSX composite index was up 3.23 points, or 0.02 per cent, at 16,418.39.
Aphria Inc jumped 15.5 per cent, the most on the benchmark index after the cannabis company posted a surprise quarterly profit.
Aphria helped the healthcare sector gain 3.2 per cent, the most among 11 major sectors.
Shares of Aphria, along with pot companies Aurora Cannabis and Hexo Corp were among the most heavily traded by volume.
Meanwhile, Wesdome Gold Mines Ltd climbed 7.1 per cent after the mining company lifted its full-year gold production target.
The heavyweight financials sector gained 0.6 per cent as Wall Street lender JPMorgan Chase & Co posted a solid quarterly profit beat.
The energy sector weighed, finishing down 0.4 per cent as oil prices dipped. The materials sector, which includes precious and base metals miners and fertilizer companies, lost 2.3 per cent as gold futures fell.
MSCI’s gauge of stocks across the globe gained 0.97 per cent while the FTSEurofirst 300 index of leading European regional shares closed up 0.93 per cent. The broad pan-European STOXX 600 index rose 1.11 per cent.
Optimism over a potential Brexit deal helped allay concerns about a slowing economy brought on by the U.S.-China trade war, which has crimped German exports.
But the mood among German investors worsened less this month than analysts had expected, a ZEW survey showed, amid concern that Europe’s biggest economy might be headed for recession.
ZEW’s headline economic sentiment index, which in August touched its lowest in almost seven years, appears to have stabilized. But investor assessment of German’s current economic condition in October was as pessimistic as it was in 2010.
Upbeat results from JPMorgan Chase & Co, UnitedHealth Group Inc and Johnson & Johnson eased concerns about the impact from a prolonged U.S.-China trade war on corporate America.
The Dow Jones Industrial Average rose 237.64 points, or 0.89 per cent, to 27,025, the S&P 500 gained 29.49 points, or 0.99 per cent, to 2,995.64 and the Nasdaq Composite added 100.06 points, or 1.24 per cent, to 8,148.71.
Chinese stocks snapped a five-day winning streak after the latest factory gate data added to China’s economic woes and the end of the trade war remained elusive.
The dollar index fell 0.14 per cent, with the euro up 0.02 per cent to $1.103. The Japanese yen weakened 0.42 per cent versus the greenback at 108.88 per dollar.
Sterling rose to $1.2774, up 1.33 per cent on the day.
Prices for the benchmark U.S. Treasury’s 10-year note fell, pushing its yield up to 1.7745 per cent.
Euro zone government bonds sold off after media reports that UK and EU negotiators were close to a draft deal on Brexit boosted investors’ risk appetite.
Irish government bonds outperformed euro zone peers on Brexit hopes. Yields on Irish 10-year bonds were back in negative territory at -0.02 per cent after sliding 6 basis points on the day.
Dublin-listed shares surged 2.6 per cent to the highest since September 2018.
Britain is Ireland’s largest trading partner and its border with the British province of Northern Ireland has been the thorniest issue in Brexit negotiations.
Gold fell 1 per cent as growing risk appetite boosted investor demand for equities.
U.S. gold futures settled down 0.9 per cent at $1,483.50 an ounce.
Oil prices fell on Tuesday, as investors worried that the unrelenting U.S.-China trade war would keep squeezing the global economy, and that swelling U.S. crude inventories would further pressure prices.
Losses were limited by optimism about a potential Brexit deal and signals from OPEC that further supply curbs are possible.
Global benchmark Brent futures lost 61 cents, or 1.0 per cent, to settle at $58.74 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 78 cents, or 1.5 per cent, to settle at $52.81.
Earlier in the session, both Brent and WTI fell by more than $1 a barrel following a report overnight that China’s factory gate prices in September declined at the fastest pace in more than three years. Also, customs data on Monday showed Chinese imports contracted for a fifth straight month.
The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund warned, but it said output would rebound if dueling tariffs were removed.
“The market continues to focus on a weakening global economic growth path that appeared little disturbed by last week’s apparent lack of significant progress at the US-China trade talks,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
Reuters