North American stock markets start week higher on easing of trade angst

The TSX ticker is shown in Toronto on May 10, 2013. (THE CANADIAN PRESS/Frank Gunn)

TORONTO -- North American markets got a lift to start the week on positive signs that the trade impasse between the U.S. and China isn't rapidly devolving.

The catalyst for Monday's increases was the Trump administration extending a limited reprieve on U.S. technology sales to Huawei that will likely become a negotiating point between the world's two largest economies, says Craig Fehr, Canadian markets strategist, Edward Jones.

"The markets are continuing to find some comfort in the idea that this is not a one-way path towards an outright trade war with the U.S. and China," he said in an interview.

That's on top of a partial delay in the application of 10 per cent tariffs on some Chinese imports until Dec. 15.

"I think that the markets are reading that as a sign that there is potentially some wiggle room for negotiations here and any positive news related to the trade front I think will show up in some optimism in the market and that appears to be the case today."

The S&P/TSX composite index was up 154.26 points at 16,304.05.

In New York, the Dow Jones industrial average was up 249.78 points at 26,135.79. The S&P 500 index was up 34.97 points at 2,923.65, while the Nasdaq composite was up 106.82 points at 8,002.81.

Fehr said global central banks, including the Federal Reserve, are moving to lower interest rates. Fed chairman Jerome Powell will address expected further rate cuts at a meeting Friday in Jackson Hole, Wyo.

The European Central Bank and German policy-makers have also indicated willingness to institute aggressive monetary and fiscal stimulus to help the struggling German economy.

And in China, the central bank unveiled an interest-rate reform designed to lower borrowing costs.

"I wouldn't expect that we've seen the last of policy actions, be it related to the currency in China or to try to stoke overall economic activity in a country and in a market that is certainly feeling the effects of the trade uncertainties."

Health care was the lone sector of the TSX to fall as shares of several cannabis producers moved lower, including Canopy Growth Corp., down 4.3 per cent, and Aphria Inc., down 3.5 per cent.

The energy sector gained 2.45 per cent to lead the sectors as higher crude prices supported a 5.9 per cent gain by Encana Corp. Husky Energy Inc. rose 5.13 per cent after an analyst suggested its low share price makes it a good time for the company to be taken private.

The October crude contract was up US$1.33 at US$56.14 per barrel and the September natural gas contract was up one cent at US$2.21 per mmBTU.

Crude prices rose on an improved global outlook along with heightened geopolitical risk following the weekend attack on a Saudi oil facility by Yemeni rebels.

After bond yields inverted last week to signal a potential recession, the 10-year yield curve has increased and pushed up the U.S. dollar. The Canadian dollar traded for an average of 75.20 cents US compared with an average of 75.27 cents US on Friday.

The December gold contract was down US$12 at US$1,511.60 an ounce and the September copper contract was up 0.65 of a cent at US$2.60 a pound.

Fehr said market volatility will remain after two days of gains helped to offset large losses to start last week.

"Certainly not a one way market to the downside but investors should probably prepare for more volatility because we're not out of the woods yet."