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Global Stocks Edge Up After Wall Street Surge

Global stocks edged up on Wednesday, following a surge on Wall Street after Federal Reserve officials hinted at the possibility of lowering interest rates to boost the economy.

In Europe, the Stoxx Europe 600 was up 0.2% in opening trade, as were Germany’s DAX and the U.K.’s FTSE 100.

France’s Dassault Aviation was the biggest gainer on the pan-European index, rising almost 5% after Goldman Sachs upgraded the stock.

The gains in Europe followed a session of mostly gentle rises in Asia, with Hong Kong’s Hang Seng Index up 0.2% and Korea’s Kospi index up 0.1%. Japan’s Nikkei 225 was the outlier, jumping 1.8% higher.

Futures pointed to modest opening gains in the U.S., with the S&P 500 and the Dow Jones Industrial Average poised to rise 0.1%, extending yesterday’s rally.

The blue-chip indexes had their best day in five months Tuesday, climbing more than 2% after supportive commentary from Federal Reserve officials buoyed investor confidence, which has been hit by concerns over Washington’s trade disputes in recent months.

Fed Chairman Jerome Powell said the central bank was monitoring the recent escalation in trade tensions and indicated it would act appropriately to sustain U.S. economic expansion. Investors took his comments to be a reference to a forthcoming rate cut. Lower interest rates reduce borrowing costs for businesses, stimulating investment.

Still, some analysts cautioned that the rally could prove short-lived as lower rates won’t resolve the underlying threat posed to growth by protectionist measures like tariffs.

“Markets are happy to focus on Fed support, but with the U.S. Commerce Department promising retaliation in the event of China’s rare-earths threat, this trade war looks set to get worse before it gets better,” London Capital Group’s head of research Jasper Lawler said.

Beijing has indicated it could restrict exports of rare-earth elements to hit back against U.S. tariffs. China is the global leader in production of the materials, which are key building blocks for many technology products.

Elsewhere, the World Bank lowered its outlook for global growth, noting that international trade and investment flows dropped faster than expected in the first six months of the year, curtailing economic activity. Global economic growth is on track to be the weakest since 2016, while trade growth is set to be the weakest since the financial crisis more than a decade ago, according to the bank’s forecasts.

The yield on 10-year U.S. Treasurys edged down on Wednesday to 2.115% from 2.119% on Tuesday. Yields on German 10-year bunds hit a fresh low of minus 0.224%.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was down 0.1%.

In commodities, global oil benchmark Brent crude fell 0.8% to $61.49 a barrel, while gold gained 0.7%.
Source: Dow Jones

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