Federal Reserve Chair Jerome Powell, speaking in Chicago Tuesday, signaled openness to cutting interest rates as growth weakens amid trade conflicts (SCOTT OLSON)

New York (AFP) – Wall Street stocks surged Tuesday, leading most global equity markets higher as the US Federal Reserve chief signaled greater openness to cutting interest rates.

Fed Chair Jerome Powell, appearing in Chicago, acknowledged that trade conflicts had dimmed the growth outlook — remarks widely seen as opening the door to a potential interest rate cut.

“We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion,” Powell said.

That marked a shift from recent Powell statements. The Fed has kept interest rates unchanged in 2019 after a series of interest rate hikes in 2018 and prior years.

Powell’s remarks assured the market “that the Fed is still on its side,” said Briefing.com.

US stocks, already positive on somewhat more optimistic trade news, added to gains after Powell’s comments. The Dow closed with a gain of 2.1 percent.

Winners included large US banks, which were propelled by higher Treasury bond yields, and large technology companies such as Facebook and Google parent Alphabet that had fallen hard on Monday on reports of stepped-up US antitrust enforcement.

“This is the Fed’s acknowledgement of where the market has gotten and what could happen if we get into an elongated trade war with China,” said Art Hogan, chief market strategist at National Securities.

– World Bank cuts forecast –

Earlier, European markets also pushed higher, with the DAX in Germany jumping 1.5 percent.

Shares of German automakers such as Daimler and Volkswagen gained following a jump in new car registrations in May, suggesting the powerhouse sector for Europe’s top economy was recovering from a months-long bout of the blues.

Analysts said the gains also reflected somewhat more favorable trade news, with a Chinese official supporting continued trade negotiations and congressional Republicans signaling significant opposition to the White House’s plan to place tariffs on Mexican goods.

But the blow from myriad trade conflicts contributed to a downbeat report from the World Bank, which slashed its global growth forecasts for the year in a report released after the market closed.

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 bottom line is that the global economy is coming to a crossroads,” World Bank economist Ayhan Kose, who oversaw the report, told AFP.

“We need to find ways to stabilize growth and I think further escalation of these trade tensions is now the number one risk that could actually weigh on the outlook,” he told AFP.

– Key figures around 2055 GMT –

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

New York – S&P 500: UP 2.1 percent at 2,803.27 (close)

New York – Nasdaq: UP 2.7 percent at 7,527.12 (close)

London – FTSE 100: UP 0.4 percent at 7,214.29 (close)

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

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

EURO STOXX 50: UP 1.0 percent at 3,333.49 (close) 

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: UP at $1.1254 from $1.1241 at 2100 GMT Monday

Pound/dollar: UP at $1.2699 from $1.2664 

Euro/pound: DOWN at 88.61 pence from 88.77 pence 

Dollar/yen: UP at 108.14 yen from 108.07 yen 

Oil – Brent Crude: UP 69 cents at $61.97 per barrel

Oil – West Texas Intermediate: UP 23 cents at $53.48 per barrel

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