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© Reuters. A man looks at an electronic card showing the Nikkei stock index in front of a broker in Tokyo
By Ritvik Carvalho
LONDON (Reuters) – Global equities advanced for the third consecutive day on Wednesday, buoyed by the growing hope of investors that the Federal Reserve may cut interest rates this year in order to revive the slowdown in the economy. The world economy, while the dollar remained close to its seven-week low.
An upsurge in trade tensions between the United States and China, which thwarted investors, presumed that an agreement was to be feared, affected global equities and fears of an impending recession.
But recent comments by policymakers have helped stem the tide as Federal Reserve officials begin this week to warn that the trade war could force them to react, prompting investors to consider cutting rates of interest. 'interest.
Interest rate futures show that the US central bank will begin lowering rates next month, with three rate cuts by the end of the year.
Fed Chairman Jerome Powell has not questioned the market's reorientation of the US interest rate trajectory on Tuesday.
He abandoned the usual reference that the Fed would be "patient" in its choice of interest rate decision and said the central bank was monitoring the fallout from the trade war and that it would react "the optionally".
The Fed's comments come a day after the St. Louis Federal Reserve Chairman James Bullard said in a speech that a rate cut might be needed "in the near future".
Stock markets reacted positively to Powell's comments as US stocks posted their biggest gain in a day in five months.
The optimism echoed Wednesday on the markets, the global index MSCI All-Country rising 0.4% after the start of negotiations in Europe, adding an additional gain of 1.4% Tuesday.
"While the markets are stunned by the support of the central bank, the effects could be short-lived," said Jasper Lawler, head of research at London Capital Group.
"Let's not forget the other half of the equation, it is the escalation of the trade war on several fronts.Today, the markets are happy to focus on the support of the Fed, but the US Department of Commerce pledging retaliatory measures in case of rare earth threat in China, this trade war seems to have to worsen before it does not happen. improves. "
China is willing to meet a reasonable demand for rare earths from other countries, but it would be unacceptable for countries using Chinese rare earths to make products to turn around and suppress China, the Ministry of Commerce said last week. China's dominance as a supplier of rare earths could be a decisive asset in the trade war with the United States.
The International Monetary Fund (IMF) lowered its economic growth forecast for China to 2019 to 6.2% due to increased uncertainty about trade frictions, saying that an increased easing of the policy would be justified if the Sino-US trade war intensified.
European markets opened up, but most stock markets with the exception of UK gains recorded gains of nearly 0.5% at 0807 GMT. The pan-European index was up 0.5%. ()
As for bonds, the yield on 10-year German bonds reached an all-time low and Italian debt maintained this week's gains as investors increasingly look for a generous credit offer for investors. euro zone banks and a reduction in the US rate. [GVD/EUR]
The 10-year Italian government bond yield has so far declined by 14 basis points this week to 2.52%, although the European Union could start this week's lawsuits. to impose on Italy a fine for breach of the limit of indebtedness.
In foreign currency, the Fed's comments weakened the dollar for a fifth consecutive day, lifting the euro and pushing investors toward safe haven assets, including the Japanese yen. The dollar has been struggling near a seven-week low. [FRX/]
"Given the magnitude of the rate appreciation of the Fed's outlook and the collapse of US cash rates in recent weeks, dollar losses appear quite moderate in this context," said Chris Turner , head of FX strategy at ING in London.
On the commodities markets, oil prices have resumed their fall, led by an unexpected gain in US stocks and comments from the head of the Russian oil producer Rosneft, which calls into question the interest of an agreement with OPEC to retain supplies. [O/R]
In European trade, prices fell by 0.85% to 53.03 dollars per barrel and futures contracts fell by 0.6% to 61.58 dollars per barrel. [O/R]
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