Fears of an economic slowdown had mounted in recent days after US President Donald Trump threatened Mexico with tariffs, adding to anxieties over the Washington-led trade war with Beijing (SAUL LOEB)

London (AFP) – The world’s stock markets mostly rose on Tuesday, with investors buoyed by signs of tensions cooling in Washington’s trade battles with China and Mexico, offsetting lingering concerns of a global economic slowdown.

Wall Street’s major indices all jumped by more than one percent in midday trading, winning back losses after a rough period last month caused by trade relations deteriorating between China and the United States. 

The tech-rich Nasdaq Composite Index soared by two percent, with Amazon and Google parent Alphabet rising after suffering big drops on Monday on reports that US regulators are planning stepped-up antitrust enforcement.

Briefing.com analyst Patrick O’Hare said the gains were a “rebound from a short-term oversold condition” and that market was “reportedly in a better mood, because it is less depressed about the trade issues”.

Fears of an economic slowdown had mounted in recent days after US President Donald Trump threatened Mexico with tariffs, adding to anxieties over the Washington-led trade war with Beijing.

O’Hare said Tuesday’s positivity “stems from a Washington Post article that indicates GOP lawmakers are discussing the possibility of holding a vote that could potentially block President Trump’s tariff plan for Mexico.”

He added that there was also “a declaration from China’s Ministry of Commerce that it hopes the US can meet half way in trade negotiations”.

Mexico on Tuesday made a last-ditch push to avoid the tariffs, with the country’s foreign minister predicting an “80 percent” chance of success in negotiating a way out.

However during a visit to London, Trump reiterated his threat that if Mexico doesn’t substantially stem the flow of migrants to the US border all goods entering the US from Mexico would be hit with tariffs.

In comments more likely to be welcomed by the markets, Trump also said that “everything is on the table” in trade talks with Britain after it leaves the EU.

London’s FTSE index rose slightly after Trump’s comments, while Frankfurt’s DAX 30 index led the way in Europe, closing more than one percent higher even as new data showed eurozone inflation dropped sharply in May. 

– US rate cut soon? –

US Federal Reserve Chairman Jerome Powell said Tuesday that the US central bank was “closely monitoring” Washington’s trade disputes.

A day after another Fed official said an interest rate cut “may be warranted soon” to preserve economic growth, Powell said the central bank “will act as appropriate to sustain the expansion.”

An increasing number of analysts predict the Fed will have to act to stimulate growth as early as this year.

The dollar rebounded after weakening overnight on the indications of a potential rate cut.

Joshua Mahony, senior market analyst at IG trading group, said that “while the US is talking about rate cuts, the Australians are busy doing it, with the Reserve Bank of Australia cutting for the first time in three-years”.

Australia’s central bank cut rates by 25 basis points to a historic low of 1.25 percent as the pace of growth slowed to levels not seen since the global financial crisis.

– Key figures around 1555 GMT –

London – FTSE 100: UP 0.4 percent at 7,214.29 points

Frankfurt – DAX 30: UP 1.5 percent at 11,971.17

Paris – CAC 40: UP 0.5 percent at 5,268.26

EURO STOXX 50: UP 1.0 percent at 3,333.49

New York – Dow: UP 1.7 percent at 25,249.06

Tokyo – Nikkei 225: FLAT at 20,408.54 (close)

Hong Kong – Hang Seng: DOWN 0.5 percent at 26,761.52 (close)

Shanghai – Composite: DOWN 1.0 percent at 2,862.28 (close)

Euro/dollar: DOWN at $1.2395 from $1.1242 at 2100 GMT Monday

Pound/dollar: UP at $1.2678 from $1.2665 

Euro/pound: DOWN at 88.62 pence from 88.77 pence 

Dollar/yen: UP at 108.30 yen from 108.07 yen 

Oil – Brent Crude: UP 64 cents at $61.92 per barrel

Oil – West Texas Intermediate: UP 30 cents at $53.55 per barrel

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Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.