Stock markets move higher on optimism at start of U.S.-China trade talks
It's a "big day of negotiations" for Washington and Beijing, but analysts warn that investors could face disappointment if nothing good comes out of the first meetings
TORONTO – North American stock markets got a lift Thursday as trade talks commenced with hopes for a truce between the U.S. and China.
Investors responded positively after U.S. President Donald Trump said that he will meet at the White House Friday with China’s vice-chairman.
“Big day of negotiations with China. They want to make a deal, but do I?,” he tweeted.
There’s hope that fate of talks have not gotten any worse, said Greg Taylor, chief investment officer of Purpose Investments, even though the U.S. took action recently to blacklist some Chinese tech firms.
“I certainly don’t think anyone’s looking for an outright deal to come out of these talks tomorrow but even a truce would be looked at as good news and potentially enough to set up a bounce in the markets,” he said in an interview.
But Taylor warned that investors could face disappointment if nothing good comes out of the first meetings between the world’s two largest economies since July.
“But it does feel like we’re close enough to some sort of truce, whether it’s a delay of tariffs, whether it’s some future agriculture buys from the Chinese, but it does feel like at least the worst-case scenario isn’t going to happen.”
The S&P/TSX composite index closed up 42.81 points at 16,422.68.
Seven of the 11 major sectors ended the day higher, led by energy as crude oil prices rose. Shares of Encana Corp. were up 2.7%.
The November crude contract was up 96 cents at US$53.55 per barrel and the November natural gas contract was down 1.6 cents at US$2.22 per mmBTU.
Most of the gains are related to positive sentiment from trade talks, said Taylor.
But he added that the Canadian oil sector may be getting a lift from the growing prospect of a minority Liberal or Conservative government in the upcoming federal election.
“A minority government either way or a Conservative majority seems at least from a perception point of view is more positive to the energy stocks.”
The materials sector rose with Teck Resources Ltd. climbing 6.6% despite lower gold prices.
The December gold contract was down US$11.90 at US$1,500.90 an ounce and the December copper contract was up 4.55 cents at US$2.61 a pound.
The health care sector dropped 6.1% as shares of several cannabis companies plummeted.
Hexo Corp. was down 23% after the company warned that its fourth-quarter net revenues will fall below its expectations by roughly 40% and it withdrew its guidance for the 2020 financial year.
The Green Organic Dutchman Holdings lost another 22.4%, while Aurora Cannabis Inc. was down 9.3%, Aphria Inc. 13.5% and Canopy Growth Corp. off 10.8%.
In New York, the Dow Jones industrial average was up 150.66 points at 26,496.67. The S&P 500 index was up 18.73 points at 2,938.13, while the Nasdaq composite was up 47.04 points at 7,950.78.
The Canadian dollar traded for an average of 75.22 cents US compared with an average of 75.05 cents US on Wednesday.
Market trading was focused on trade but volumes were light because of the Jewish holiday and the upcoming Thanksgiving weekend in Canada, said Taylor.
“It still seems so dependent on this one trade deal that everyone’s trying to figure out how to play it and I think most of us are looking forward to earnings season starting in the next week or two when we can actually start talking about companies again and away from the macro stuff.”
He said investors are relatively cautious about corporate earnings in light of FedEx warning a few weeks ago about its earnings.
“There could be potential for surprises if some of these companies can beat and deliver ahead of expectations.”