Global markets largely tracked Wall Street yesterday, with prices in New York edging up ahead of a US-China presidential summit expected to focus on trade and North Korea.
In Europe, stock prices recovered from their earlier weakness, with stocks in London paring back their losses, while the blue-chip indices in Frankfurt and Paris ended the session in positive territory.
London’s FTSE 100 was down 0.4% at 7,303.20 points, Frankfurt’s DAX 30 was up 0.1% at 12,230.89 points, Paris’ CAC 40 climbed 0.6% at 5,121.44 points, while the EURO STOXX 50 was 0.5% up at 3,489.57 points, at the close yesterday.
US stocks edged higher, recovering from a sell-off the previous day spurred by Federal Reserve meeting minutes suggesting a more aggressive monetary tightening policy than the market had anticipated.
The firmer market in New York helped put a floor under earlier losses in Europe, as well as indications from European Central Bank that it has no plans to start rolling back its policy of easy money any time soon.
Investors are now eyeing a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping.
“Any sense that the summit is proceeding in a very amicable way could give way to a relief rally in the next few sessions,” said Briefing.com analyst Patrick O’Hare. “Conversely, less amicable-sounding communications could spark the opposite.”
ECB chief Mario Draghi said the central bank will not raise interest rates before ending its mass bond-buying programme, quashing speculation that a mounting eurozone recovery would prompt him to change course.
“We are not yet at a stage where inflation dynamics can be self-sustaining without monetary policy support,” Draghi told a Frankfurt conference.
Following the previous day’s sharp losses, “European markets may be exposed to further downside shocks as anxiety ahead of the Trump-Xi summit dents risk sentiment,” said FXTM analyst Lukman Otunuga.
Wednesday’s sell-off had been triggered by the US Federal Reserve minutes, which suggested that policymakers are considering unwinding the $4.5tn-worth of Treasury bills and other assets on its books.
At the moment, the Fed reinvests principal payments it receives from its bond holdings back into the market — maintaining the size of its portfolio and the amount of money in the system.
The Fed’s reinvestment policy also helps suppress interest rates, so a reversal may signal more expensive future borrowing cots.
“This is huge news for traders in fixed interest and global markets more broadly. It means that a source of demand in US fixed interest markets is going to be reduced,” said Greg McKenna, chief market strategist at AxiTrader, in a note.

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