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Global Stocks at Four-month High on US-China Trade Hopes

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Stocks worldwide climbed to a four-month high on Wednesday, boosted by optimism over progress in US-China trade discussions and a dovish picture at major central banks.

US President Donald Trump stated that talks with China were going well and suggested he was open to pushing the deadline past March 1 to complete negotiations.

Trump’s comment drove Asian equities higher, while European shares surged as well, sending the MSCI world equity index to a four month high. The index was last up by 0.3 percent to $499.87.

US stock futures indicated a flat open and appeared to be planning on clinging to Tuesday’s strong gains.

Chief Strategist Jim Reid said the newsflow was encouraging, despite signs that further development was needed.

The overall feeling is that it is one step forward, three-quarters of a step back at the moment. So positive momentum but still fragile, Reid stated.

Trump said the real question would be whether the US would increase the tariffs as planned. Up to now, it was believed US duties on $200 billion worth of Chinese imports would more than double to 25 percent from 10 percent if no trade deal was secured by then.

Chief Market Analyst Craig Erlam stated that the market is very much pricing in a deal at this stage, and there is some merit to this as he does not think one would engage in such a solid period of talks over a number of weeks unless the person feels he is getting somewhere.

The talks of an extension suggest Trump is positive about the direction of travel, Erlam said, although he added that the market remains exposed to any further setbacks.

Central Banks Turn Dovish

In addition to hopes for a US-China trade agreement mainly supporting global stock markets, dovish central bank statements are also making a contribution.

New York Fed President John Williams stated on Tuesday that he was satisfied with the current level of US interest rates, deeming it unnecessary to hike them again unless economic expansion or inflation suddenly moves up.

In Europe, possibility have been rising that the European Central Bank (ECB) will resume a program to offer long-term cheap loans to banks to pick up a weakening economy, while the Bank of Japan (BOJ) has confirmed its readiness to further ease stimulus.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1 percent to $519.43 after adding as much as 1.1 percent to its highest since October 2.

Hong Kong’s Hang Seng climbed 1 percent to HK$28,514.05, having raised 1.3 percent to hit six-month highs.

South Korea’s KOSPI advanced 1 percent to ₩2,229.76, recovering to levels last seen in October, while Japan’s Nikkei posted two-month highs, raising 0.6 percent to ¥21,431.49.

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