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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 opinions of the past 24 hours have been marked by a clear shift in opinion and, even though it is difficult to fully attribute the passage to Powell's comments at the Fed's conference yesterday, the fact that the president apparently did not push the market prices very dovish investors with a little more confidence, "said Jim Reid, strategist at German Bank (DE 🙂
Optimism spread to the markets on Wednesday as the MSCI All-Country World Index gained 0.4% in London, London, adding an additional gain of 1.4% on Tuesday. The index is up 1.8% over the week so far and is on track for its best weekly performance since early April.
were up 0.7%, indicating a dynamic opening on Wall Street.
Jasper Lawler, head of research at the London Capital Group, warned that support from central bank markets could be short-lived.
"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's dominance as a supplier of mineral elements, known as rare earths and used in the industry, could be a key bargaining tool in the trade war with the United States.
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.
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 markets recorded gains close to 0.5% at 1111 GMT. The pan-European index was up 0.5%.
Italian sovereign bond prices and bank stocks fell after the European Commission concluded that Italy was in breach of EU budget rules because of its growing debt, which justifies the launch of the European Union. a disciplinary procedure.
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.
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.
"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.
fell 0.6% to $ 53.16 per barrel. Futures contracts gained 0.05% to $ 62.00 per barrel.
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