Fed chief Jerome Powell admits that trade tensions have dimmed the growth outlook (SCOTT OLSON)

London (AFP) – Stock markets rose Wednesday, following an overnight rally on Wall Street triggered by Federal Reserve chief Jerome Powell indicating greater openness to lowering US interest rates, helping to ease trade war growth worries.

Speaking in Chicago on Tuesday, Powell admitted that ongoing trade conflicts had dimmed the growth outlook — remarks widely seen as opening the door to a potential interest rate cut.

The comments signal a shift in the policy of the Fed, which has kept interest rates unchanged in 2019 after a series of hikes in 2018 and previous years. 

Europe’s main stock markets were up about half a percent in midday deals, while the euro rose against the dollar.

Tokyo’s main stocks index jumped Wednesday to close 1.8 percent higher. Hong Kong won 0.5 percent, Seoul edged up 0.1 percent and Taipei climbed 0.3 percent. Shanghai was flat.

On Wall Street Tuesday, the Dow surged 2.1 percent higher.

Buying was supported also by more favourable news on the trade front, with Beijing backing negotiations to resolve its spat with Washington and congressional Republicans opposing President Donald Trump’s tariff threats against Mexico.

Worries over the US-China trade war “have eased following reports that China’s commerce ministry said the trade friction should be resolved through dialogue”, Okasan Online Securities’ chief strategist Yoshihiro Ito said in a commentary.  

But a new World Bank report showing reduced global growth forecasts for the year suggested that investors could expect the trade headwinds to continue for some time yet.

The world economy is now expected to expand by 2.6 percent this year, three tenths of a percentage point lower than the January forecast, and well below the three percent growth seen in 2018, according to the Global Economic Prospects report.

The International Monetary Fund has meanwhile lowered China’s economic growth forecast for 2019 and 2020, citing “uncertainty” over the trade war between Beijing and Washington.

The US-China trade spat has seen the top two superpowers deploy tit-for-tat tariffs on trade worth hundreds of billions of dollars, with no date set for stalled talks to resume.

But there are hopes that Trump and Chinese President Xi Jinping will meet at the G20 summit in Japan this month to jump-start negotiations.

– Key figures around 1045 GMT –

London – FTSE 100: UP 0.5 percent at 7,251.61 points

Frankfurt – DAX 30: UP 0.4 percent at 12,023.20

Paris – CAC 40: UP 0.5 percent at 5,296.16

EURO STOXX 50: UP 0.3 percent at 3,343.70

Tokyo – Nikkei 225: UP 1.8 percent at 20,776.10 (close)

Hong Kong – Hang Seng: UP 0.5 percent at 26,895.44 (close)

Shanghai – Composite: FLAT at 2,861.42 (close)

New York – Dow: UP 2.1 percent at 25,332.18 (close)

Euro/dollar: UP at $1.1278 from $1.1254 at 2100 GMT Tuesday

Pound/dollar: UP at $1.2708 from $1.2699 

Euro/pound: UP at 88.73 pence from 88.61 pence 

Dollar/yen: UP at 108.31 yen from 108.14 yen 

Oil – Brent Crude: UP eight cents at $62.05 per barrel

Oil – West Texas Intermediate: DOWN 26 cents at $53.22 per barrel

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