Numerous stock markets experienced significant gains on Wednesday, driven by Germany’s initiative to substantially increase defence spending, indications that US President Donald Trump might relax substantial tariffs, and China’s economic ambitions.
Frankfurt saw an impressive surge of three percent during afternoon trading, and German bond yields climbed after Friedrich Merz, the presumed next chancellor, unveiled the spending proposals with the aim of revitalizing Europe’s largest economy.
Defence and manufacturing stocks across Europe also witnessed robust increases, while the euro appreciated sharply against the dollar.
The Paris stock exchange rose by 1.8 percent, and Milan gained 2.4 percent. London advanced by 0.2 percent.
“This is monumental,” stated Kathleen Brooks, research director at the XTB trading platform, in response to the German news.
“For years, economists have argued that Germany needed to modify its spending regulations to emerge from the economic downturn. It has taken a Conservative chancellor-in-waiting to take decisive action,” she remarked.
Market sentiment during the trading sessions in Europe and Asia was bolstered by remarks from US Commerce Secretary Howard Lutnick, who suggested that Trump would likely “work something out” concerning Canada and Mexico, where goods faced 25 percent tariffs.
“Markets would perceive even the smallest rollback from Trump as a positive indication, helping to ease worries after concerns about a potential trade war,” noted Russ Mould, investment director at the AJ Bell investment platform.
Global stock markets fell sharply on Tuesday after the implementation of US tariffs on China, Mexico, and Canada, prompting retaliatory measures from these countries and raising fears that Europe might be Trump’s next target. Meanwhile, US bond yields plunged as investors sought safety from the riskier stock market.
Should no softer US stance on tariffs be announced, “it seems likely that the sell-off will continue,” warned Trade Nation analyst David Morrison.
Wall Street stocks opened on Wednesday with only slight gains following a survey indicating a significant slowdown in hiring by US private firms and Lutnick’s new comments on potential tariff reductions.
– Chinese economy –
In Asia, investors reacted positively to China’s economic targets for the upcoming year and the possibility of tariff relief, leading to nearly three percent growth in Hong Kong’s market.
China set its annual growth target at around five percent and pledged to prioritize domestic demand as the primary driver of its economy during the annual National People’s Congress meeting.
Beijing also announced an unusual increase in fiscal funding, permitting its budget deficit to reach four percent of GDP this year.
This announcement coincided with a commitment to generate 12 million new jobs within Chinese cities and to aim for a two percent inflation rate this year.
The world’s second-largest economy plans to raise defence spending by 7.2 percent, matching last year’s increase.
However, analysts have moderated expectations regarding anticipated stimulus due to the strong economic challenges China faces, particularly given US tariffs.
These challenges include a persistent property sector debt crisis, consistently low consumer demand, and sluggish job growth among young people.
Elsewhere on Wednesday, the stock price of Hong Kong-based CK Hutchison surged over 20 percent after the company decided to sell its profitable Panama Canal ports to a US-led consortium amidst intense pressure from Trump.
– Key figures around 1430 GMT –
New York – Dow: UP less than 0.1 percent at 42,534.83 points
New York – S&P 500: UP less than 0.1 percent at 5,780.91
New York – Nasdaq Composite: UP 0.2 percent at 18,317.43
London – FTSE 100: UP 0. percent at 8,
Paris – CAC 40: UP 2. percent at 8,
Frankfurt – DAX: UP 3. percent at 23,
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 1.0753 from 1.0485 on Tuesday
Pound/dollar: UP at $1.2854 from $1.2694
Dollar/yen: DOWN at 148.73 from 149.32 yen
Euro/pound: UP at 83.66 pence from 82.60 pence
West Texas Intermediate: DOWN 2.6 percent at $66.51 per barrel
Brent North Sea Crude: DOWN 2.1 percent at $69.58 per barrel
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