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An index of global stock markets climbed to a 21-month high on Monday, boosted by growing hopes for a U.S.-China trade deal and the view that the U.S. Federal Reserve this week will deliver its third interest rate cut for 2019.

U.S. Treasury yields rose after the European Union agreed to a three-month flexible delay of Britain’s departure. Improved risk sentiment also sapped demand for the safe-haven U.S. dollar, the Japanese yen and gold.

MSCI’s All Country World Index, which tracks shares across 47 countries, was up 0.48 per cent to its highest intraday level since Feb. 2, 2018.

U.S. and Chinese officials are “close to finalizing” parts of a trade agreement after high-level telephone discussions on Friday, the U.S. Trade Representative’s office and China’s Commerce Ministry said. The USTR provided no details on areas of progress.

U.S. President Donald Trump has said he hopes to sign the deal with China’s President Xi Jinping next month at a summit in Chile.

“Most of the things that have been worrying markets haven’t necessarily been resolved but the concern about them has waned a little bit,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin.

Canada’s main stock index slipped slightly on Monday, despite growing hopes for a trade deal between the United States and China, as resource stocks slid with the price of gold and oil.

The Toronto Stock Exchange’s S&P/TSX Composite index was down 16.96 points, or 0.10 per cent, at 16,387.53.

Five of the 11 major Canadian sectors were higher.

The materials sector fell 1.3 per cent, the most among the major sectors, while energy stocks dipped 0.9 per cent.

In company news, Restaurant Brands International Inc. missed estimates for quarterly revenue as its biggest chain Tim Hortons reported a surprise fall in comparable sales, sending the company’s shares down 3.7 per cent.

Leading the index were Celestica Inc., up 8.3 per cent, Canada Goose Holdings Inc., up 5.5 per cent, and Methanex Corp., higher by 5.3 per cent.

Lagging shares were Aphria Inc., down 5.4 per cent, Pan American Silver Corp., down 4.3 per cent, and Parex Resources Inc., lower by 4.3 per cent.

The S&P 500 hit a record high on Monday, while the Nasdaq fell just short of its lifetime high touched in late July as a more civil tone between the United States and China lifted hopes for a possible trade deal and investors looked toward a Federal Reserve rate cut later this week.

Microsoft Corp shares climbed 2.46 per cent, making the stock among the biggest boosts to each of three major indexes after the technology giant won the Pentagon’s $10 billion cloud computing contract, beating out Amazon.com Inc.

After rising as much as 0.71 per cent to 3,044.08, the benchmark S&P closed up 0.56 per cent at 3,039.34, topping the record high of 3,025.86 hit on July 26, while the Nasdaq ended the session less than 5 points below its closing high. The Dow Jones Industrial Average ended less than 1 per cent away from its record closing level.

President Donald Trump said on Monday he expected to sign a significant part of a trade deal with China ahead of schedule but did not elaborate on the timing, building on optimism from Friday when Washington said it was “close to finalizing” some parts of a trade deal.

Economic data shows the trade war between the world’s two largest economies has begun to take a toll on both countries, leading to worries about a global slowdown.

Global central banks have responded by easing monetary policy. The Federal Reserve is expected to follow that trend at its two-day policy meeting beginning on Tuesday, with high expectations that it will cut interest rates for a third time this year.

“After we finish earnings season and get through this Fed meeting, people will be looking to the trade deal,” said Walter Todd, chief investment officer at Greenwood Capital in Greenwood, South Carolina. “Importantly, as you watch the economic numbers come in here and globally between now and year end, you want to continue to see incremental positive sequential changes. You want to get some confirmation that in fact growth has bottomed and has started to improve.”

The Dow Jones Industrial Average rose 132.25 points, or 0.49 per cent, to 27,090.31, the S&P 500 gained 16.79 points, or 0.56 per cent, to 3,039.34 and the Nasdaq Composite added 82.87 points, or 1.01 per cent, to 8,325.99.

The outlook for a quarter percentage point cut in U.S. borrowing costs have jumped to 94.1 per cent from 49.2 per cent last month, according to CME Group’s FedWatch tool.

The third-quarter earnings season has managed to ease some concerns related to the impact of trade tensions on corporate profits, with over 78 per cent of the 204 S&P 500 companies that have reported so far surpassing profit expectations, according to Refinitiv data. Still, third-quarter earnings are expected to show a decline of 2 per cent.

Investors are waiting for earnings from heavyweights this week such as Apple Inc, Starbucks and Merck & Co Inc.

Chipmakers, which have acted as a proxy for trade tensions with China, gained 1.75 per cent on Monday. The technology, healthcare and communication services sectors gained more than 1 per cent each.

Among other stocks, AT&T Inc rose 4.28 per cent after the U.S. wireless carrier said it would add two new board members and consider selling off up to $10 billion worth of non-core businesses next year.

Tiffany & Co surged 31.63 per cent after Louis Vuitton owner LVMH made a $120 per share offer to buy the U.S. luxury jeweler.

Oil prices fell on Monday after four days of gains as expectations U.S. crude stockpiles will rise and worries about weak Chinese industrial data offset hopes oil demand will increase if talks progress on a Sino-American trade deal.

Brent futures fell 45 cents, or 0.7 per cent, to $61.57 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 85 cents, or 1.5 per cent, to $55.81.

Earlier in the session, Brent and WTI both climbed to their highest levels in a month, hitting $62.34 and $56.92, respectively.

“The energy complex came out of the gate underperforming our expectations as it appears that another significant build in Cushing supply could be forthcoming,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.

After building for three weeks in a row, U.S. crude oil stockpiles at the Cushing, Oklahoma, delivery point for WTI, have risen by about 1.5 million barrels in the week through Oct. 25, traders said, citing data from market intelligence firm Genscape.

Gold eased as trade hopes limited gains after the precious metal jumped 1 per cent in the previous session. Spot gold was down 0.92 per cent at $1,490.51 per ounce.

Reuters

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