Global stocks rose on Tuesday, as investors hoped that US-China trade tensions would ease and credit risks in the banking sector would lessen, while gold prices fell.
US President Donald Trump said he expects a “fair trade deal” in his meeting with Chinese President Xi Jinping in South Korea next week. This announcement boosted optimism in the markets. The signing of a rare earth element supply agreement between the US and Australia also supported confidence. In Asia, the possibility of Sanae Takaichi becoming Japan’s new prime minister pushed the Nikkei index to a record high and the yen into decline. Last week, risk appetite had decreased due to bad loans in US regional banks and the government shutdown. However, as these concerns eased, investors turned to the “buy the dip” opportunity.
Pepperstone Research Director Chris Weston said, “Markets easily overcame the anxiety at the wall; new capital provided fresh oxygen to the market.”
European Central Bank (ECB) Chief Economist Philip Lane warned that eurozone banks could be under pressure if dollar liquidity tightens. Despite this, the ECB is not expected to cut interest rates in the near future. […] […] On the other hand, the expectation that the Federal Reserve (Fed) may make three interest rate cuts in the next six months and the statements from the White House that “the government shutdown may end this week” have led investors to turn to stocks again. […] […] The S&P 500 index closed the day with a strong increase, while chip stocks (SOX) hit a record high. Analysts predict that third-quarter S&P 500 earnings growth will rise to 9.3% year-on-year.
In money markets, the dollar rose 0.25% to 151.14 yen. Takaichi’s expansionary policies supported Japanese stocks, while gold prices fell 0.6% to $4,355.
