Stock markets advanced yesterday as investors, getting a grip on lingering fears of a deepening trade war between the US and China, went bargain-hunting with gusto, dealers said.
Key European markets were well in positive territory by the close, although London was held back by a strong pound.
London’s FTSE 100 closed 0.5% up at 7,367.32 points, Frankfurt’s DAX 30 ended 0.9% up at 12,326.48 points and Paris’ CAC 40 finished 1.1% higher at 5,451.59 points, while the EURO STOXX 50 added 1.0% at 3,403.12 points at close.
Wall Street also looked bullish approaching midday in New York, with both the Dow and the S&P 500 indices in record territory.
“The absence of negative news has promoted buying,” said David Madden, a market analyst at CMC Markets UK.
“The dust has settled in the wake of tariffs being announced, and investors are happy to swoop in and snap up stocks,” he said.
While “global trade uneasiness” — as analysts at the Charles Schwab brokerage put it — is currently contained, the markets’ resilience may well be short-lived, some analysts predicted.
Joshua Mahony at IG detected a “hesitant tone” on trading floors. “The fears over US-China trade are likely to persist for some time yet,” he said.
Emerging market currencies held their own after Beijing pledged not to weaponise the yuan in its trade standoff with the United States.
Markets had already been on the rise this week after the latest tit-for-tat tariffs from China and the US were considered lenient, and seemed to allow for talks, with observers suggesting that any further escalation was unlikely in the near term.
And while China on Wednesday hit back at US President Donald Trump’s accusation that it is using the trade conflict to affect November’s key mid-term elections, the generally upbeat sentiment continued in Asia and Europe yesterday.
Emerging market (EM) currencies enjoyed some much-needed buying support, having been beaten down by trade war fears in recent months, as well as concerns of a spillover from crises in Argentina, South Africa and Turkey.
Analysts said that as well as the easing trade tensions, a key boost for the currencies was Premier Li Keqiang’s statement that China would not devalue the yuan to fend off the effects of any tariffs.
Back in Europe meanwhile, the Organisation for Economic Co-operation and Development warned that ongoing trade tensions were likely to slow down global economic expansion.
Cutting its previous forecast for global growth, the OECD said that “a further rise in trade tensions would have significant adverse effects on global investment, jobs and living standards”.
The warning was echoed a few hours later by the International Monetary Fund which said worsening trade tensions were likely to exact a “significant economic cost” to the world economy.
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