Wall Street stocks edged higher yesterday after China removed some US goods from its tariff list while in Europe stocks ended higher despite investors giving a lukewarm response to a takeover bid for the London Stock Exchange by its Hong Kong rival.
News that US President Donald Trump had fired his hawkish national security adviser John Bolton also lifted sentiment, with analysts saying it could see the White House take a less strident approach and ease geopolitical tensions.
“Equities in Europe are higher... as traders look ahead to today’s European Central Bank (ECB) update, and Beijing’s decision to soften its stance on the US has helped sentiment too,” noted David Madden, market analyst at CMC Markets UK.
London’s FTSE 100 rose 1% to 7,338.03, Frankfurt’s DAX 30 gained 0.8% to 12,359.07 and Paris’s CAC 40 was up 0.4% to 5,618.06 points yesterday. China yesterday said it would spare a number of US products from punitive tariffs in what is seen as an olive branch by Beijing in the protracted trade war ahead of high-level talks next month.
That could be enough to help shore up chances of global growth given that “four weeks back the market still feared a recession,” noted Jochen Stanzl, analyst at CMC Markets.
However, the goods do not include major agricultural items that could be crucial to the ultimate success of any agreement between the two sides, whose stand-off is dragging on the global economy.
Attention has also turned increasingly to central banks as investors seek more stimulus.
“While trade war optimism has been given as a reason to explain yesterday’s gains, it wasn’t enough for the Dow Jones to come out of the gates hot,” observed Connor Campbell at Spreadex.
Nevertheless, the US index was able to pull into positive territory, up 0.4% some three hours into trading.
Campbell added the LSE takeover bid had “provided the main thrust of the UK index’s afternoon gains”.
Today’s ECB gathering is much anticipated amid hope of fresh measures including a possible interest rate cut, fresh bond-buying quantitative easing (QE) or other loosening tools.
Next week, the Federal Reserve’s board is tipped to use its own meeting to announce another reduction in borrowing costs as the world’s top economy shows signs of stalling.
“With the expectation of the resumption of quantitative easing by the ECB... and a rate cut by the Federal Reserve next week, the risk environment has solidified and tempted investors out of hiding from the bond markets and back into equities,” said Jeffrey Halley, senior market analyst at OANDA.
The Hong Kong Stock Exchange earlier said after the Asian close it had bid almost £32bn for its London rival.
The blockbuster proposal including debt, worth $40bn or €36bn, is however dependent on the London Stock Exchange Group (LSEG) scrapping a planned $27bn takeover of US financial data provider Refinitiv.
In reaction, LSEG said it would “consider the proposal” but stressed that it “remains committed” to buying Refinitiv.
The surprise news initially sent LSEG shares surging 10% before falling back to close 5.9% up at £72.06, still far below the offer price of more than £83 per share as analysts doubted the likelihood of a deal being struck amid LSEG’s commitment to Refinitiv.
“It’s a bold move and one that appears to have a low chance of success,” said Neil Wilson, chief market analyst at Markets.com, noting also that the London exchange had a history of failed tie-ups.
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