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At the open: Wall Street rises on signs of North Korea talks

A Toronto Stock Exchange (TSX) logo is seen in Toronto in this file photo.

© Mark Blinch / Reuters

Canada's main stock index was little changed in early trading on Tuesday, supported by gains in natural resource shares and as global equities markets rose on signs North Korea is willing to hold talks with the United States.

At 9:41 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index rose 13.55 points, or 0.09 per cent, to 15,554.83.

The Canadian dollar strengthened against its U.S. counterpart on Tuesday, rebounding from an eight-month low hit the day before, as trade war fears eased and a historic agreement between North Korea and South Korea boosted risk appetite.

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South Korea said it would hold a summit with North Korea for the first time in more than a decade, which investors took as a cue to sell the U.S. dollar and buy commodity-linked currencies, which tend to outperform as the outlook for the global economy improves.

The price of oil , one of Canada's major exports, rose 0.6 per cent and global stocks climbed, helped also by increasing resistance to U.S. President Donald Trump's proposed tariffs on steel and aluminum.

A number of countries including Canada, which is the largest supplier of both metals to the United States, have threatened to retaliate to the tariffs.

The Canadian dollar was trading 0.6 per cent higher at $1.2890 to the greenback, or 77.58 U.S. cents, its first advance since Feb. 23.

The currency traded in a range of $1.2865 to $1.2995. On Monday, it touched its weakest since July 5 at $1.3002

U.S. stocks opened higher on Tuesday as the prospect of talks between North Korea and the United States and increasing resistance to President Donald Trump's proposed metals tariffs encouraged risk appetite among investors.

The Dow Jones Industrial Average rose 108.53 points, or 0.44 per cent, to 24,983.29. The S&P 500 gained 10.17 points, or 0.37 per cent, to 2,731.11. The Nasdaq Composite added 35.81 points, or 0.49 per cent, to 7,366.51.

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North Korea is willing to hold talks with the United States on denuclearization and will suspend nuclear tests while those talks are under way, the South said on Tuesday after a delegation returned from the North after meeting leader Kim Jong Un.

Trump, in the first U.S. response, said on Tuesday: "We will see what happens."

The news added to early gains for U.S. markets, which have been recovering from a bout of concern over the possibility of a global trade war following remarks by Trump last week.

"When geopolitical environment is improving, there's very much a risk-on sentiment," said Fiona Cincotta, senior market analyst at City Index in London.

"I would not say that trade war fears are completely erased ... there are doubts that Trump will actually manage to push the trade tariffs through."

Investor fears were eased after Trump's threat of hefty tariffs on aluminum and steel was seen as a negotiating tool following his tweet on Monday that Canada and Mexico could avoid the tariffs if they ceded ground in the North American Free Trade Agreement (NAFTA) talks.

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Top U.S. Republicans, including House Speaker Paul Ryan, urged Trump on Monday not to go ahead with the tariffs.

"There's also a lot of pressure regarding the tariff - not only GOP, trading partners but also many business leaders in the United States," said Peter Cardillo, chief market economist at First Standard Financial in New York.

Federal Reserve Bank of Dallas President Robert Kaplan told CNBC the base case on interest rate hikes has not changed and remains at three for the year, adding that the United States is either at or beyond full employment now.

Last month's U.S. payrolls report showed wages growing at their fastest pace in more than eight years, fueling concerns that both inflation and interest rates would rise faster than expected that led to a steep selloff.

Investors are keenly waiting for the upcoming February jobs data due on Friday to gauge the strength of the labor market.

Federal Reserve Bank of New York President William Dudley is scheduled to speak later on Tuesday.

The U.S. Department of Commerce is scheduled to release factory orders data for January at 10 a.m. ET.

The broadest gauge of global stocks, MSCI's All Country World Index, was up more than 0.6 per cent for a second day.

"It looks like 'risk on' sentiment is coming back," said Saxo Bank's head of FX strategy John Hardy, also pointing to weaker safe-havens like the Japanese yen and Swiss franc.

Europe's mood was also supported after Germany reformed its coalition government to end more than five months in political limbo and as the initial unease caused by a hefty election vote for anti-establishment parties in Italy ebbed.

Italian bonds outperformed and shares in Milan bounced almost 1.5 per cent having slipped to a six-month low after its weekend vote.

Europe's big three - Britain's FTSE, Germany's Dax and France's Cac - were up 0.5 - 1 per cent too, while the euro and pound both climbed as the dollar lost its footing again.

"Over and above the noise about (U.S.) protectionism we are getting now, we would need to see real evidence it is damaging growth and that is going to take some time," said head of global macro strategy at State Street Global Markets, Michael Metcalfe.

"We have been here before in 2002 and 2003 with steel tariffs and that wasn't devastating."

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.5 per cent, snapping five straight days of losses. Japan's Nikkei jumped 1.8 per cent from a five-month low, helped too by reassurances from the head of the Bank of Japan that it would not suddenly end stimulus.

Korean shares also erased the remainder of the hit they took after Trump's tariff warnings last week. The country is seen as being among the most exposed in Asia due to the large amount of steel it exports to the United States.

"Even in the face of such bad news, it shows the volume of money in the equity market that is looking for an entry point," said JP Morgan Asset Management's chief markets strategist for the UK and Europe, Karen Ward.

The threat of a trade war is not the only source of tension for the world's financial markets.

As the global economy steams ahead, investors have become increasingly concerned that U.S. inflation, which has been subdued since the 2008 financial crisis, could finally pick up and lead to fast interest rate hikes.

The European Central Bank meets this week and looks almost certain later this year to end its three-year-old, 2.5 trillion euro ($3.08 trillion) stimulus programme.

U.S. 10-year bond yields reared back up to 2.89 per cent ahead of U.S. trading and euro zone yields followed suit with German Bunds off a five-week low at 0.69 per cent.

"The ECB is going to be presenting growth forecasts that are likely to be stronger, but will be at pains to stress that the move away from monetary easing will be delicately done," said Peter Chatwell, head of euro rates strategy at Mizuho.

The euro traded back above $1.2410, having extended its recovery from a seven-week low of $1.2154.

In Italy, where currency traders are keeping an eye on post-election developments as none of the three main factions has emerged with enough seats to govern alone, the country's President, Sergio Mattarella, is expected to open formal coalition talks in April.

Early elections are possible if no coalition accord is found.

The dollar's swoon helped the Canadian dollar off an eight month low C$1.2995 it had hit on Monday as the latest round of NAFTA renegotiations fanned the trade nerves.

Canada is most exposed U.S. tariff threats but its central bank holds a rate meeting on Wednesday and if it keeps the door open to further hikes, the currency "is likely to be able to resist further notable depreciation," Commerzbank said.

In commodities, crude prices held firm, underpinned by robust demand forecasts and prospects for informal contacts sought by OPEC with U.S. shale oil producers at an industry meeting in Houston this week.

U.S. West Texas Intermediate crude futures traded at $63.03 per barrel, up 0.7 per cent following a 2.2-per-cent gain on Monday. Bellwether industrial metal copper gained 1.5 per cent in easily its biggest jump in almost a month.

China's government said on Monday it was confident about keeping its growth rate at around 6.5 per cent this year and on Tuesday defended a move to hike military spending by the biggest amount in three years.


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