World stocks bounce back as trade fears ease

Global stocks railed higher Thursday as investors judged recent trade war fears were overblown, dealers said.

In Europe, the French and German stock markets battled higher with 1.8-percent gains, while London rose 1.2 percent.

Tokyo led the gainers in Asia, climbing a solid 1.5 percent as the more positive market sentiment reduced demand for the haven yen, pushing the currency down. Hong Kong and Shanghai were closed for holidays.

“Investors are expressing confidence that a solution will be found before a full-blown trade war erupts,” said Craig Erlam, senior analyst at trading firm Oanda.

However, he also sounded a note of caution over the lingering market concerns.

“The reality is that a trade war remains a real possibility,” warned Erlam.

“US President Donald Trump is looking to pick a fight with the world’s second largest economy, a fight he believes is easy to win, and China is willing to go toe to toe with the United States — even if it means inflicting harm at home.”

The more bullish outlook for stocks came on the heels of another see-saw session on Wall Street that saw equities rally impressively into the close.

Traders have been spooked by tit-for-tat accusations and measures between China and the United States that some fear could lead to a full-blown trade war between the world’s top two economies.

China unveiled plans Wednesday to hit major US exports in retaliation for US tariff plans detailed the day before.

“It’s hard to see how anyone wins in this but investors currently, despite the declines we’ve seen, are expressing confidence that a solution will be found before a full blown trade war erupts,” said Erlam.

The Dow whipsawed nearly 800 points between its session low and peak on Wednesday before finishing with a gain of one percent.

Analysts said the catalyst for the turnaround was comments by recently appointed White House economic advisor Larry Kudlow, who suggested Trump’s strident approach to China was a negotiating tactic to win concessions.

“I understand the stock market anxiety. I get that,” Kudlow told Fox Business. “I think at the end of this whole process, the end of the rainbow, there’s a pot of gold.”

– Key figures around 1145 GMT –
London – FTSE 100: UP 1.2 percent at 7,121.17 points

Frankfurt – DAX 30: UP 1.8 percent at 12,170.90

Paris – CAC 40: UP 1.8 percent at 5,231.98

EURO STOXX 50: DOWN 0.4 percent at 3,346.93

Tokyo – Nikkei 225: UP 1.5 percent at 21,646.42 (close)

Hong Kong – Hang Seng: 29,518.69 (Wednesday close)

Shanghai – Composite: 3,131.84 (Wednesday close)

New York – Dow: UP 1.0 percent at 24,264.30 (close)

Euro/dollar: DOWN at $1.2268 from $1.2278 at 2100 GMT

Dollar/yen: UP at 107.13 yen from 106.78

Pound/dollar: DOWN at $1.4052 from $1.4079

Oil – Brent North Sea: DOWN six cents at $67.96 per barrel

Oil – West Texas Intermediate: DOWN ten cents at $63.27