LONDON – European and US stock markets posted solid gains on Wednesday as investors, growing de-sensitised to trade war talk, poured money back into shares, traders said.
“Equities are reaching for the stars once again, with healthy gains across the board,” said Chris Beauchamp, the chief market analyst at IG.
Surging oil prices, now at their highest levels in three-and-a-half years, gave a fillip to energy firms listed on key markets, while the dollar rose, lifted by players looking for a temporary safe haven currency.
“Oil charging towards $80 the barrel boosting energy stocks and another twist in the trade war story drove the markets higher on Wednesday,” said Fiona Cincotta, senior analyst at City Index.
US President Donald Trump on Wednesday said he supported tougher restrictions on foreign investment in sensitive technology, as well as export controls on those goods, but he stopped short of imposing specific restrictions on China.
Energy-fuelled equity strength was “offsetting mixed messages coming out of the White House,” said Artjom Hatsaturjants, an analyst at Accendo Markets.
New threats of restrictions on Chinese investment were sliding “on and off the table, depending on who you ask”.
World equity markets had slumped Monday as trade war fears took a heavy toll on valuations, while attempts to claw back lost ground lacked conviction Tuesday.
But by the close Wednesday, Europe’s key markets were all around one percent higher, while Wall Street was also solidly up, having risen steadily throughout the New York morning.
Trump’s ‘funny way’
On oil markets, both main crude contracts extended strong gains triggered by the State Department warning US allies that they would be hit with sanctions if they did not halt Iran oil purchases by 4 November.
WTI, the US oil futures benchmark, even went to its highest level since November 2014, hitting $72.83 after data showed a decline in American crude inventories.
Analysts had a field day pointing out Trump’s apparent inconsistencies over oil.
“For someone who has claimed to be unhappy about rising oil prices, the Trump administration sure has a funny way of showing it, or taking steps to achieve it,” quipped Michael Hewson at CMC Markets.
When Trump blamed OPEC for higher crude prices he was “rather overlooking the fact that if you take over 3.8m barrels of supply out of global production that tends to push prices up”.
The commodity has enjoyed a healthy run since the weekend when OPEC and Russia agreed to raise output by only a small amount.
Trade tensions continued to simmer in the background, with investors on edge awaiting the next developments.
Stephen Innes, head of Asia-Pacific trading at Oanda, said Trump’s attack on Harley-Davidson indicated he is not ready to back down on his hardline protectionist “America First” agenda.
Trump on Tuesday hit out at the iconic motorbike maker after it said it was planning to shift some manufacturing overseas because of European Union tariffs put in place as retaliation for US duties.
American as apple pie
In a commentary, Innes said: “The only thing I can think of that is more iconic Americana than apple pie is Harley-Davidson.
“So, after the president’s recent Twitter tirade directed at the iconic motorcycle manufacturer, it cements the view that, friend or foe, no one is safe from the wrath of the US administration’s America First trade policy.”
On currency markets, the dollar rose, reversing an earlier bout of weakness.
“The US dollar remains among the strongest of currencies out there,” said Fawad Razaqzada at Forex.com.
“Not only is it finding support from safe-haven flows amid the current stock market weakness, but it is also in demand due to the growing disparity between monetary policies in the US against other major economies,” he said.
Key figures around 1545 GMT
London – FTSE 100: UP 1.1 percent at 7,621.69 points (close)
Frankfurt – DAX 30: UP 0.9 percent at 12,348.61 (close)
Paris – CAC 40: UP 0.9 percent at 5,327.20 (close)
EURO STOXX 50: UP 0.8 percent at 3,397.13
New York – Dow Jones: UP 0.5 percent at 24,410.61
Tokyo – Nikkei 225: DOWN 0.3 percent at 22,271.77 (close)
Hong Kong – Hang Seng: DOWN 1.8 percent at 28,356.26 (close)
Shanghai – Composite: DOWN 1.1 percent at 2,813.18 (close)
Euro/dollar: DOWN at $1.1594 from $1.1648 at 2100 GMT
Pound/dollar: DOWN at $1.3149 from $1.3200
Dollar/yen: UP at 110.39 yen from 110.08 yen
Oil – Brent Crude: UP $1.50 at $77.64 per barrel
Oil – West Texas Intermediate: UP $1.99 at $72.52