- World stocks jumped Wednesday after the Federal Reserve hinted that it might cut interest rates later this year.
- Fed Chairman Jerome Powell pledged to “act as appropriate” to maintain US economic growth in the face of a global trade war.
- The rally is a “clear case of central banks to the rescue,” said Jasper Lawler, the head of research at London Capital Group.
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Global stocks jumped Wednesday, tracking a boom in US equities on Tuesday, after the US Federal Reserve hinted that it might cut interest rates later this year.
Fed Chairman Jerome Powell pledged to ” act as appropriate” to maintain US economic growth in the face of a global trade war. His comments sent the Dow Jones Industrial Average, the S&P 500, and the Nasdaq up more than 2% – their biggest one-day gains in five months.
The stock-market rally is a “clear case of central banks to the rescue,” said Jasper Lawler, the head of research at London Capital Group. “Powell gave the markets what they wanted to hear, and the result was a spectacular rally, as traders increased their bets of a rate cut happening before the year end.”
Lawler warned the recovery might not last, however, given the US’s rising trade tensions with China, Mexico, India, and others.
“Today the markets are happy to focus on Fed support, but with the US Commerce Department promising retaliation in the event of China’s rare earth’s threat, this trade war looks set to get worse before it gets better,” he said.
Such a sharp rally on the mere hint of a rate cut has worried some analysts.
“Markets are in a state of flux right now, so we are seeing broader swings without a directional shift,” said Neil Wilson, the chief market analyst for Markets.com. “I’d be cautious about any rally like this,” he added, that seems based “on nothing but fumes.”
“Those betting the farm on the Fed cutting rates this year may be left with a small harvest,” he added.
Here’s the market roundup as of 9.42 a.m. ET:
- US stocks opened higher with the Dow Jones Industrial Average, S&P 500, and Nasdaq all up by around 0.4%.
- European equities pared earlier gains with Germany’s DAX, Britain’s FTSE 100, and the Euro Stoxx 50 almost flat.
- Asian markets were mixed, with the Shanghai Composite and the SZSE Component almost flat, Hong Kong’s Hang Seng up 0.5%, and Japan’s Nikkei up 1.8%.
- Oil has fallen further, with Brent crude down 0.8% at $61.50 and West Texas Intermediate crude down 1.4% at $52.80.