Global stocks rally on G20 hopes, dovish ECB

Global stocks rally on G20 hopes, dovish ECB, photo: shutterstock

Hopes were raised that long-running trade talks between Washington and Beijing may yet yield an agreement after US President Donald Trump said he had a "good" conversation with China's Xi Jinping and would hold an "extended meeting" at the Group of 20 summit in Japan later this month.

Xi said the countries "will both gain by cooperating, and lose by fighting," according to a readout by Chinese state broadcaster CCTV.

US stocks opened the session higher amid enthusiasm over dovish central bank statements, but Trump's comments on the G20 further lifted the market. All three major US indices climbed one percent or more.

Paris and Frankfurt each gained around two percent, boosted especially by ECB chief Mario Draghi, who promised further action if the economy fails to gain traction.

"Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools," Draghi told the ECB's annual economics gathering in Sintra, Portugal.

"Super Mario is back!" said IG analyst Chris Beauchamp in summary at the market action.

"Despite only having a few months left to his tenure, the head of the ECB has handed his successor a firmly dovish bias, as he leaves the door open to more QE (quantitative easing stimulus) and renewed negative rates at the ECB in order to try once again to kick-start the eurozone economy."

- Awaiting the Fed -

Draghi's comments came as the US Federal Reserve kicked off a two-day policy meeting.

Although the Fed is not expected to cut interest rates on Wednesday, investors have been heartened by more dovish comments lately from central bankers and will be analyzing Fed Chair Jerome Powell's statements for clues on future steps, which they hope will signal a clear willingness to boost the economy.

Trump has repeatedly criticized the Fed and pressured Powell to cut rates, and on Tuesday lashed out at Draghi's statements, saying an ECB cut would "unfairly" harm US goods competing with a cheaper euro.

The dollar rose against the euro following the Draghi remarks, but retreated against the pound and yen.

BK Asset Management's Kathy Lien said the dollar could fall if Powell's adopts a more dovish tone than at the May press conference, when he dismissed talk of easing.

But if "Powell puts on a brave face, emphasizes the areas of strength in the US economy ... we could see a significant recovery in the greenback," she said.

Among individual companies, embattled aerospace giant Boeing shot up 5.4 percent after it announced the sale of 200 of the 737 MAX planes to International Airlines Group.

The announcement at the Paris Air Show comes as Boeing's global fleet of 737 MAX planes remains grounded following two crashes that killed 346 people. Boeing has said it is making progress with regulators on having an upgraded plane recertified.

- Key figures around 2040 GMT -

New York - Dow: UP 1.4 percent at 26,465.54 (close)

New York - S&P 500: UP 1,0 percent at 2,917.75 (close)

New York - Nasdaq: UP 1.4 percent at 7,953.88 (close)

London - FTSE 100: UP 1.2 percent at 7,443.04 (close)

Frankfurt - DAX 30: UP 2.0 percent at 12,331.75 (close)

Paris - CAC 40: UP 2.2 percent at 5,509.73 (close)

EURO STOXX 50: UP 2.1 percent at 3,452.89 (close)

Tokyo - Nikkei 225: DOWN 0.7 percent at 20,972.71 (close)

Hong Kong - Hang Seng: UP 1.0 percent at 27,498.77 (close)

Shanghai - Composite: UP 0.1 percent at 2,890.16 (close)

Euro/dollar: DOWN at $1.1202 from $1.1218 at 2100 GMT

Pound/dollar: UP at $1.2558 from $1.2534

Dollar/yen: DOWN at 108.43 yen from 108.54 yen

Brent North Sea: UP $1.20 at $62.14 per barrel

Oil - West Texas Intermediate: UP $1.97 at $53.90 per barrel