Global equity benchmarks edged higher and gold soared to an all-time high on Monday as investors weighed expectations for another U.S. stimulus package with concerns that rising tensions between the United States and China will the slow the recovery of the global economy from the coronavirus pandemic.
Gold for delivery in August added another $33.50 to settle at $1,931.00 per ounce Monday, after earlier climbing as high as $1,941.90. That’s an intraday record for the most actively traded contract, and it follows up on Friday’s record high for a settlement price.
It’s unusual for the price of gold, which tends to rise when worries about the economy are high, to do so well at the same as stocks, which tend to wilt under such worries, said Mark Hackett, chief of investment research for Nationwide.
“It’s a tug of war between those investors and they’re really not acting in a normal way,” Hackett said. “But it’s 2020, nothing’s normal.”
Silver also rallied, jumping as much as 8% to $24.57, its highest since August 2013, and was up 6.9% at $24.31 per ounce.
China took over the premises of the U.S. consulate in the southwestern city of Chengdu on Monday, after ordering that the facility be vacated in retaliation for China’s ouster last week from its consulate in Houston.
U.S. Secretary of State Mike Pompeo said Washington and its allies must use “more creative and assertive ways” to press the Chinese Communist Party to change its ways.
“U.S. President (Donald) Trump used to say China’s President Xi Jinping is a great leader. But now Pompeo’s wording is becoming so aggressive that markets are starting to worry about further escalation,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
MSCI’s gauge of stocks across the globe gained 0.65% following mixed trading in Asia and broad declines in Europe after the United Kingdom imposed a quarantine on travelers returning from Spain, which has seen an increase in coronavirus cases.
In Toronto, the S&P/TSX composite index was unofficially up 164.27 points, or 1.03%, at 16,161.33.
The materials sector, which includes precious and base metals miners and fertilizer companies, soared 3.5%.
The energy sector added 0.7 per cent, while tech stocks and utilities increased 2 per cent and 0.4 per cent, respectively.
The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices rose and the greenback again declined against a basket of major currencies, with the loonie approaching a six-week high notched last week.
The U.S. dollar fell to its lowest level since June 2018, weighed by deteriorating U.S.-China relations and concerns about the U.S. economy as COVID-19 infections climbed.
“We have seen U.S. dollar weakness pretty much across the board,” said Rahim Madhavji, president at KnightsbridgeFX.com. “At the end of the day weakness in the U.S. dollar is typically a risk-on event for the market.”
Wall Street’s main indexes were higher as investors monitored progress in government stimulus efforts, while the price of oil , one of Canada’s major exports, settled higher.
The Canadian dollar was trading 0.4% higher at 1.3366 to the greenback, or 74.82 U.S. cents. The currency traded in a range of 1.3354 to 1.3413.
Last Thursday, the loonie touched its strongest intraday level since June 10, at 1.3347.
Wall Street’s main indexes closed higher on Monday as investors monitored progress in U.S. government stimulus efforts along with rising U.S. COVID-19 cases and bet on some of the market’s most high-profile stocks ahead of earnings reports.
Apple Inc, Amazon.com Inc, Facebook Inc and Alphabet Inc, all due to report earnings this week, were among the top boosters of the S&P 500. The technology-heavy Nasdaq outperformed the S&P and the Dow.
Netflix and Microsoft also gained, noted John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio, who said investors were buying stocks in the group, which fell in recent sessions.
“When all six of them are higher they’ll take markets with them,” said Augustine, adding that with the exception of Facebook the so-called FAANG plus M stocks due to report have “a low bar to step over to beat earnings estimates.”
Unofficially, the Dow Jones Industrial Average rose 116.26 points, or 0.44%, to 26,586.15, the S&P 500 gained 23.88 points, or 0.74%, to 3,239.51 and the Nasdaq Composite added 173.09 points, or 1.67%, to 10,536.27.
The biggest gainers the S&P’s 11 major sectors were technology and materials. Financials , utilities and energy lagged.
Investors also focused on government stimulus as U.S. Senate Republicans raced to complete details of a $1 trillion coronavirus aid proposal before enhanced unemployment benefits expire on Friday. The aid proposal, which could involve a reduction in emergency federal weekly unemployment benefits from $600 to $200, would then need to be negotiated with Democrats.
Some investors worried whether the stimulus would provide sufficient support for the economy. These concerns were reflected in gains in assets viewed as safe havens such as the big growth companies and gold, according to Kristina Hooper, Chief Global Market Strategist at Invesco in New York.
“Today’s story is about concerns that the economic recovery will be slow and halting. That’s from a combination of an inability to bend the virus curve and what is shaping up to be a small stimulus package that may not address all the needs being created by this terrible crisis,” said Hooper.
Trillions of dollars in fiscal and monetary stimulus have been pivotal pushing the back S&P 500 closer to its February record high.
On Monday, however as the world confronted the prospect of rising COVID-19 infections, countries in Asia and Europe imposed new restrictions.
In the United States, where infection rates have climbed since June, two baseball games were canceled due to the virus while President Donald Trump’s national security adviser Robert O’Brien was the most senior official to test positive.
Investors kept their eye on earnings, with 189 S&P 500 companies scheduled to report results this week. About 80% of the 130 S&P 500 firms that have reported so far have beaten a low bar of earnings estimates, according to IBES Refinitiv data.
Few expected any major announcement at a two-day Federal Reserve meeting, but analysts said policymakers were likely to lay the groundwork for more action later this year.
Moderna Inc’s shares rose after U.S. and company officials said its COVID-19 vaccine may be ready for widespread use by year-end, after the drugmaker announced it kicked off a trial to demonstrate safety and effectiveness, which could be the final hurdle prior to regulatory approval.
Oil prices rose on Monday on hopes that stimulus efforts will help revitalize the U.S. economy, but the gains were capped by rising coronavirus cases and tensions between Washington and Beijing.
Brent crude rose 7 cents to settle at $43.41 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 31 cents to settle at $41.60 a barrel.
U.S. Senate Republicans were expected to unveil a new $1 trillion coronavirus aid package on Monday afternoon.
“If we can put more money into the pockets of consumers, they’re going to spend it on goods and services,” said Phil Flynn, senior analyst at Price Futures group in Chicago. “That should lead to more gasoline demand, more travel and more shopping.”
A weak U.S. dollar, which makes dollar-denominated commodities cheaper for holders of other currencies, also helped boost oil futures. The U.S. dollar index reached its lowest level since June 2018, hurt by domestic economic concerns and deteriorating U.S.-China relations.
The renewed tensions between the world’s two largest economies following the closures of consulates in Houston and Chengdu have sent investors to safe havens, such as gold and bonds, and away from riskier assets like oil futures.
Reuters and The Associated Press
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