London (AFP) – European and Asian stock markets rallied on Wednesday, buoyed by Germany’s plan to massively boost spending on defence, signals that US President Donald Trump could ease huge tariffs, and China’s economic targets.
But Wall Street stocks and the dollar slid as a survey showed a sharp slowdown in hiring by private firms in the United States, and data demonstrated a massive build-up of US crude oil stockpiles, both suggesting that economic growth is faltering. The surge in US crude stockpiles sent the main US oil contract down four percent, and the main international contract, Brent, fell below $70 per barrel to its lowest level since 2021.
In European trading, Frankfurt surged 3.4 percent after the likely next chancellor, Friedrich Merz, announced the spending plans in the hope of also reviving Europe’s biggest economy. The yield on 10-year German government bonds posted its biggest daily increase since reunification, indicating the magnitude of the change in spending and debt policy. European defence and manufacturing stocks also climbed. The Paris stock exchange gained 1.6 percent, while Milan jumped 2.4 percent. London dipped less than 0.1 percent.
“This is huge,” Kathleen Brooks, research director at XTB trading platform, said in reaction to the news out of Germany. “For years, economists have said that Germany needed to change its spending rules to get out of the economic hole. It’s taken a Conservative chancellor-in-waiting to pull the trigger,” she added.
Sentiment during the European and Asian trading sessions was boosted by comments from US Commerce Secretary Howard Lutnick, who said late on Tuesday that he thought Trump would “work something out” with regards to Canada and Mexico, whose goods were hit with 25 percent levies. “Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war,” said Russ Mould, investment director at investment platform AJ Bell.
But hopes for overall tariff relief faded after Lutnick said that Trump was now looking at excluding certain sectors from the higher levies. Global stocks tumbled on Tuesday after US tariffs on China, Mexico, and Canada took effect, and the three countries retaliated, while fears grew that Europe could be Trump’s next target. Meanwhile, US bond yields fell sharply as investors fled to safety from riskier equities.
In Asia, investors welcomed China’s economic targets for the coming year and the prospect of tariff relief, with Hong Kong closing up almost three percent. China set an annual growth target of around five percent and vowed to make domestic demand its main economic driver, as lawmakers attended the annual meeting of the National People’s Congress. Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four percent of its GDP this year.
It comes alongside a pledge to create 12 million new jobs in China’s cities and a push for two percent inflation this year. The world’s second-largest economy is also planning to increase defence spending by 7.2 percent, the same as last year. But observers have tempered expectations for an expected stimulus given that China is facing strong economic headwinds, especially in light of US tariffs. These include a persistent property sector debt crisis, stubbornly low consumer demand, and stuttering employment for young people.
– Key figures around 1430 GMT –
New York – Dow: DOWN 0.1 percent at 42,470.71 points
New York – S&P 500: DOWN 0.4 percent at 5,756.29
New York – Nasdaq Composite: DOWN 0.4 percent at 18,209.40
London – FTSE 100: DOWN less than 0.1 percent at 8,755.84 (close)
Paris – CAC 40: UP 1.6 percent at 8,173.75 (close)
Frankfurt – DAX: UP 3.4 percent at 23,081.03 (close)
Tokyo – Nikkei 225: UP 0.2 percent at 37,418.24 (close)
Hong Kong – Hang Seng Index: UP 2.8 percent at 23,594.21 (close)
Shanghai – Composite: UP 0.5 percent at 3,341.96 (close)
Euro/dollar: UP at 1.0770 from 1.0485 on Tuesday
Pound/dollar: UP at $1.2871 from $1.2694
Dollar/yen: DOWN at 148.56 from 149.32 yen
Euro/pound: UP at 83.69 pence from 82.60 pence
West Texas Intermediate: DOWN 4.0 percent at $65.50 per barrel
Brent North Sea Crude: DOWN 3.4 percent at $68.64 per barrel
© 2024 AFP
