Global shares hit record highs in festive cheer

World stocks scaled record highs on Friday and oil prices stayed buoyant in a holiday-shortened week, as optimism grew that a U.S.-China trade deal would soon be signed.
Global shares reach record highs on trade optimism while European shares are set for the best year since the financial crisis. (Issei Kato/Reuters)

World stocks scaled record highs on Friday and oil prices stayed buoyant in a holiday-shortened week, as optimism grew that a U.S.-China trade deal would soon be signed.

Traders returned from their Christmas and Boxing Day break to digest comments from Beijing that it was in close contact with Washington about an initial trade agreement. Earlier, U.S. President Donald Trump had talked up a signing ceremony for the recently struck phase-one trade deal.

Rising to another record high, European shares were on course for their best year since the financial crisis. The pan-European STOXX 600 index was up 0.2 per cent, helped by gains in export-heavy German shares. The benchmark index has reached record highs for three sessions in a row.

The FTSE 100, set for its best run in three years, added 0.4 per cent. Mining companies provided the biggest boost, with Glencore Plc and BHP Group Plc climbing about 2 per cent each.

The positive tone was set in Asia. MSCI's broadest index of Asia-Pacific shares outside Japan jumped 0.8 per cent to 555.39, a level not seen since mid-2018. It is up 15.5 per cent so far this year.

China's blue-chip CSI300 was down 0.1 per cent, although for the week the index was up 0.1 per cent.

Profits at industrial companies in China in November grew at the fastest pace in eight months, breaking a three-month declining streak, as production and sales quickened. But broad weakness in domestic demand remains a risk for earnings next year, say analysts.

Risks ahead

The rally in global shares contrasts with a plunge late last year, when the Sino-U.S. trade war had sapped investor confidence. The worries scuttled capital expenditure plans over much of 2019, but strong employment and signs of an improving global economy suggest that will change next year.

The U.S. Federal Reserve's policy easing, economic data that have come in above expectations, and corporate profits have helped lift stocks this year, along with trade-related optimism. Markets are now waiting for January's fourth-quarter financial results to see whether sentiment among companies has improved.

But some analysts are wary about risks ahead in 2020.

"The trade war ... is far from over," Piotr Matys, FX strategist at Rabobank, wrote in a research note. "In our view, this is just a temporary truce. Another unsolved major issue is Brexit. Geopolitical risk can suddenly resurface."

Easing uncertainty about Britain's exit from the European Union helped sterling gain to a four-day high of 85.17 pence against the euro.

The rise was helped by European Commission President Ursula von der Leyen's saying the EU may need to extend the deadline for talks about a new trade relationship with Britain.

After being battered during 2019 by hedge funds betting on its weakening, the euro rose on Friday to an eight-day high of $1.1142.

Against the Japanese yen, the U.S. dollar showed some weakness, falling 0.2 per cent to 109.48 yen. But the dollar was not far off the six-month high of 109.73 yen it reached at the beginning of this month.

The trade-sensitive Aussie dollar rose as high as $0.6958 against its U.S. counterpart, a five-month high.

Oil surges

Oil prices hit three-month highs. Brent crude, the global benchmark, rose to $68.14 per barrel, extending gains for a fourth session. U.S. West Texas Intermediate gained 22 cents to $61.90 a barrel. Brent has rallied about 25 per cent in 2019, supported by supply cuts in oil-exporting countries

Gold prices eased from a near two-month high hit earlier in the session as investors booked profits amid thin holiday trade. It was still on course for its biggest weekly gain since early August. Spot gold was 0.01 per cent down to $1,510.80 per ounce.

How North America fares

Canada's main stock index hovered near break-even in its first morning of trading since the Christmas and Boxing Day break.

The S&P/TSX composite index was up 5.5 points at 17,185.65 after 90 minutes of trading, although it had been in the red earlier.

In New York, the Dow Jones industrial average was up 60.6 points at 28,681.99. The S&P 500 index was up 3.2 points at 3,243.13, while the Nasdaq composite was up 3.68 points at 9,026.07.

The Canadian dollar traded at 76.44 cents US, compared with an average of 76.01 cents US on Tuesday.

With files from the Canadian Press