NEW YORK (Reuters) - A major global stock index jumped to a 5-1/2-month high on Wednesday as optimism on the potential for U.S. trade deals cleared the path for technology stocks to resume their leadership mantle.
Talks to renew the North American Free Trade Agreement (NAFTA) hinge on Canada after Monday’s deal between the United States and Mexico.
MSCI’s world equity index, which tracks shares in 47 countries, gained 0.39 percent .MIWD00000PUS while the S&P 500 and the Nasdaq U.S. stock indexes hit all-time highs.
The Dow Jones Industrial Average .DJI rose 60.55 points, or 0.23 percent, to 26,124.57, the S&P 500 .SPX gained 16.52 points, or 0.57 percent, to 2,914.04, and the Nasdaq Composite .IXIC added 79.65 points, or 0.99 percent, to 8,109.69. [.N]
Andrew Milligan, head of global strategy at Aberdeen Standard Investments, said investor optimism was tinged with caution. He noted the difficulty of predicting U.S. trade negotiations, which could make markets choppy.
“It is an erratic rally,” he said. “We need a bit more fuel to the fire.”
U.S. President Donald Trump threatened to proceed with Mexico alone and levy tariffs on Canada if it did not come on board with revised trade terms for NAFTA. But a trade deal without Canada might not win approval from the U.S. Congress because such a deal would have to pass a higher bar.
“The final decisions are unlikely until 2019 at the earliest,” Goldman Sachs analysts wrote in a note to clients.
But on Wednesday, at least, familiar leaders from the long bull-market run resumed their leadership role. Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O) and Microsoft Corp (MSFT.O) all hit record intraday highs and helped lift Wall Street indexes.
The dollar, which has been a safe haven from trade concerns, turned negative after early gains. The dollar index .DXY, which measures the U.S. currency against several trading partners, fell 0.18 percent. The Mexican peso MXN= gained 0.59 percent versus the greenback, while the Canadian dollar CAD= rose 0.17 percent.
Elsewhere in the global trade conflict, a deadline for public comment on Trump’s increased tariffs on $200 billion of Chinese goods was less than a week away on Sept. 5. The White House has said it wants to settle NAFTA before negotiating with China.
“There’s a big debate taking place among investors: Is Trump hoping to reach agreement with all the big players to demonstrate what a successful negotiator he is, or is he trying to make sure he’s got agreement with NAFTA and the EU and therefore can turn all the firepower on to China?” said Aberdeen Standard’s Milligan.
Emerging market stocks .MSCIEF rose 0.07 percent, but remained under pressure from weakening currencies. An index of those countries’ currencies .MIEM00000CUS fell 0.3 percent in dollar terms.
Turkey's lira TRY= extended losses, down about 3 percent against the dollar, a two-week low, as concern grew about the effects of the country's currency crisis. Finance Minister Berat Albayrak was quoted as saying he did not see a risk to the economy.
Dollar-denominated Turkish bank bonds also fell after Moody’s sounded the alarm over the sector.
Argentina's peso ARS= collapsed more than 7 percent to a record low of 33.9 per U.S. dollar on Wednesday, prompting the central bank to sell dollar reserves for a second straight day while the President Mauricio Macri asked the International Monetary Fund for early release of funds under a standby deal.
Oil prices shot higher, supported by news of falling Iranian crude shipments as U.S. sanctions deterred buyers.
Brent crude LCOc1 jumped 1.6 percent, to settle at $77.14, while U.S. oil CLc1 moved 1.4 percent higher at $69.51 a barrel. [O/R]
(Graphic: Global asset performance Aug 29: reut.rs/2LAbPsC)
(Graphic: Global earnings growth revisions Aug 29: reut.rs/2LAe0Mw)
(Graphic: Global assets in 2018: tmsnrt.rs/2jvdmXl)
(Graphic: Global currencies vs. dollar: tmsnrt.rs/2egbfVh)
(Graphic: Emerging markets in 2018: tmsnrt.rs/2ihRugV)
(Graphic: MSCI All Country World Index Market Cap: tmsnrt.rs/2EmTD6j)
Reporting by Trevor Hunnicutt; Additional reporting by Wayne Cole in Sydney and Helen Reid in London; Editing by David Gregorio and Leslie Adler