Global stocks rose Wednesday following a surge on Wall Street after Federal Reserve officials hinted at the possibility of lowering interest rates to boost the economy.
The enthusiasm of investors extended from Asia through Europe to the US futures, all coloring in green.
Allied to hints from St Louis Fed chief James Bullard a day earlier, investors took that as a shift from the “patient” approach the Fed has taken in recent months, and a pointer for the European Central Bank’s own policy update on Thursday, where low inflation is making the case for more stimulus. The markets are strongly pricing in two rate cuts this year and the Fed leaving it open is a positive.
Investors continue to monitor developments in the trade front. They cheered comments made by the Chinese Commerce Ministry, which said in a post that the “differences and frictions between the two sides” should be dealt with through talks. Market watchers took those remarks as a sign of possible easing of trade tensions between Beijing and Washington after each country hiked tariffs on billions of dollars worth of each other’s goods in May. But, the post also said talks “need to be based on mutual respect, equality and mutual benefit”.
The US Treasury Secretary Steven Mnuchin is set to meet with People’s Bank of China Governor Yi Gang at a gathering of G-20 finance leaders this weekend in Japan. The meeting would mark the first face-to-face meeting between the two countries in nearly a month.
Asian markets recap
Asian markets performed strongly on Wednesday following Wall Street’s rally as the US central bank signaled a rate cut and worries about the escalating trade war took a backseat.
Japanese Nikkei 225 jumped by 1.80% to 20,776.10 points with the stocks of Fanuc rising by 2.99%. Topix also moved into the green territory with a growth of 2.07% to a level of 1,530.08 points. The shares of Softbank Group jumped by 3.02% after the company announced on Tuesday that it expects a profit of 1.2 trillion JPY (nearly 11.1 billion USD) from the sale of shares of the Chinese technology giant Alibaba.
In South Korea, the index Kospi grew by 0.1% and closed at 2,069.11 points, while stocks of Hyundai Motor added 1.44%.
In China, the mainland index ended the trading session almost unchanged after failing to hold back earlier growth. The Shanghai Composite and Shenzhen Component remained at 2,861.42 and 8,846.05 points respectively. The Shenzhen Component recorded a slight increase to 1,494.77 points.
In Hong Kong, the index Hang Seng grew by more than 0.2%, as in the last hours of trading Chinese telecom equipment maker ZTE grew by about 4%.
In Australia, the S&P ASX 200 added 0.41% to its value and ended the session at 6,358.50 points, with most sectors recording growth. The Australian economy grew less than expected in the first quarter, according to the data released on Wednesday. The country’s gross domestic product rose by 0.4% in the first three months of the year, a little below the projected 0.5% of the economists. The data was released just a day after the Reserve Bank of Australian lowered its key interest rate to a record low.
European mid-session recap
European stocks edged higher on Wednesday. The main index STOXX 600 index rose 0.52% to 374.62 points at 10:30 GMT, shaking off a muted start and joining a rally in Asia and on Wall Street after US central bank chief Jerome Powell promised to act “as appropriate” to combat rising trade war risks.
German index DAX 30 is up by 0.63% to 12,046.67 points at mid-session trading. The benchmark received serious support from the technology stocks. The shares of SAP are up by 1.6%, while semiconductor manufacturer Infineon Technologies added 1.5% to its market cap. Carmakers, however, are still under pressure with Volkswagen being down by 0.4%. Financial stocks are also into the red and Commerzbank collapsed by 2.17%, while the decline in Deutsche Bank is about 0.3%.
French index CAC 40 inched higher by 0.59% to 5,299.40 points at 10:30 GMT. French aviation company Dassault Aviation’s shares jumped 4.75% after Goldman Sachs upgraded the stock to “buy”, citing capital flexibility and inexpensive valuation. This gave impetus to the sector with Airbus adding 1%.
British index FTSE 100 is up by 0.5% to 7,250.62 points. Despite an initially lackluster start, the blue-chip index logged solid gains into lunchtime. Among the firms leading the index higher was cruise operator Carnival PLC, which was up 3.4% ahead of its dividend pay-out to investors next week. Other prominent risers included housebuilder Barratt Developments PLC, which was up 3.8%, and software firm Micro Focus International PLC which rose 4.2%.
Wall Street pre-session recap
The US stock index futures were slightly higher on Wednesday morning after Wall Street delivered its second best day of trade for 2019 in the previous session.
At 6:40 a.m. ET, Dow futures were up 152 points, pointing to a higher open of more than 161 points. Futures on S&P 500 and Nasdaq were higher too.
Today, the investors will be watching ADP employment numbers at 08:15 a.m. ET, followed by a services PMI at 09:45 a.m. ET and an ISM non-manufacturing index at 10 a.m. ET.