The U.S. dollar gained and equity markets around the world jumped on Thursday as fears eased of a trade war between China and the United States after Washington expressed a willingness to negotiate.
The dollar rose to a three-week high against the Japanese yen and a 10-week peak versus the Swiss franc, two safe-haven assets that investors buy in times of market uncertainty.
U.S. Treasury yields rose to one-week highs as risk appetite returned with the reduced fears of a trade war and on expectations that a growing economy will be confirmed on Friday when the closely watched U.S. employment report for March is released.
Canada’s main stock index rebounded on Thursday from a nearly eight-week low the day before, as ebbing trade tensions helped boost energy and financial shares.
The Toronto Stock Exchange’s S&P/TSX composite index unofficially closed up 191.68 points, or 1.26 per cent, at 15,356.05. Eight of the index’s 10 main groups ended higher.
Darryl White, Bank of Montreal’s chief executive, says he is confident that talks to revamp NAFTA will lead to a “positive conclusion.”
Canadian Foreign Minister Chrystia Freeland said on Wednesday that the three countries had made good progress in the talks but there was still work to be done.
Suncor Energy Inc. gained 4.7 per cent and Canadian Natural Resources Ltd. advanced 4.1 percent, boosting the energy sector by 4.2 per cent. Encana Corp. jumped 4.3 per cent, while Cenovus Energy Inc. was up 4.1 per cent.
Heavyweight financial stocks rose 0.9 per cent, led a 2-per-cent jump by Canadian Western Bank and 1.9-per-cent increase by Laurentian Bank of Canada. Bank of Montreal and Bank of Nova Scotia rose 1 per cent.
Marijuana producers led health care stocks 2.6 per cent higher on the day. Aurora Cannabis Inc. finished up 10.7 per cent, while Aphria Inc. rose 9.6 per cent and Canopy Growth Corp. increased 3.1 per cent.
The Dow and S&P 500 posted gains for a third day in a row on Thursday, the longest streak in about a month, as investors’ worries of an escalating trade conflict between the United States and China eased and their focus on upcoming earnings grew.
The Dow Jones Industrial Average rose 240.85 points, or 0.99 per cent, to 24,505.15, the S&P 500 gained 18.14 points, or 0.69 per cent, to 2,662.83 and the Nasdaq Composite added 34.45 points, or 0.49 per cent, to 7,076.55.
Major European stock indexes surged 2 per cent or more, with Germany’s exporter-heavy DAX, the market most exposed to China, climbing 2.90 percent.
MSCI’s all-country world stock index, which tracks shares in 47 countries, gained 1.01 per cent, led by Amazon.com Inc., Apple Inc. and Facebook Inc.
“Markets seem to be in relief rally mode and part of this is really driven by the fact we’re not really in a trade war yet,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.
“This is quite small in terms of the impact to the economy, we still have the runway of tax reform that’s coming along,” Ripley said, referring to the boost that U.S. President Donald Trump’s new tax code is delivering to corporate earnings.
The pan-European FTSEurofirst 300 index of leading regional shares closed up 2.48 per cent.
MSCI’s emerging market index rose 0.86 per cent.
Signs the United States is looking to resolve the trade dispute with China lifted the dollar but limited an advance in oil prices because crude is dollar-priced and a stronger greenback makes oil purchases in other currencies more expensive.
White House economic adviser Larry Kudlow said he expects the United States and China to work out differences and trade barriers likely “will come down on both sides.”
The dollar index rose 0.36 per cent, with the euro down 0.35 per cent to $1.2234. The Japanese yen weakened 0.60 per cent versus the greenback at 107.44 per dollar.
Joe Manimbo, senior market analyst at Western Union Business Solution in Washington, said the dollar was boosted by a view that “Washington and Beijing might broker a trade deal that doesn’t torpedo global commerce or damage the world economy.”
U.S. crude settled up 17 cents to $63.54 per barrel and Brent gained 31 cents to settle at $68.33.
Treasury yields rose as investors awaited Friday’s closely watched U.S. jobs report, which will be evaluated for accelerating jobs gains and wage pressures.
Benchmark 10-year U.S. Treasury notes fell 11/32 in price to yield 2.8302 per cent.
In Europe, most government bond yields were up 2 to 6 basis points. Germany’s benchmark 10-year bund yield was trading at 0.524 percent, up 3 basis points on the day.
Gold prices fell as the apparent willingness to resolve a trade dispute reduced demand for bullion as a place to park money. The stronger dollar also crimped gold as it is more expensive for users of other currencies.
U.S. gold futures for June delivery settled down $11.70 at $1,328.50 per ounce.
Many suspect Washington will likely back down on some fronts after Beijing threatened tariffs on soybeans, the top U.S. agricultural export to China. Threats to such exports are a powerful weapon for Beijing given the potential impact on Iowa and other farming states that backed Trump in the presidential election.