Stock markets rallied Wednesday, buoyed by Germany’s plan to massively boost spending on defence, signals that US President Donald Trump could ease huge tariffs and China’s economic targets.
Frankfurt surged 3.5 per cent in midday deals and German bond yields rose after the likely next chancellor, Friedrich Merz, announced the spending plans in the hope of also reviving Europe’s biggest economy.
European defence and manufacturing stocks also jumped while the euro rose sharply against the dollar.
The Paris stock exchange gained 2.1 percent while Milan was up 2.2 percent. London advanced 0.5 per cent.
“This is huge,” Kathleen Brooks, research director at XTB trading platform said in reaction to the news out of Germany.
“For years, economists have said that Germany needed to change its spending rules to get out of the economic hole. It’s taken a Conservative chancellor-in-waiting to pull the trigger,” she added.
Investors also reacted to comments from US Commerce Secretary Howard Lutnick, who said that he thought Trump would “work something out” with regard to Canada and Mexico, whose goods were hit with 25 per cent levies.
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“Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war,” said Russ Mould, investment director at investment platform AJ Bell.
Global stocks tumbled Tuesday after US tariffs on China, Mexico and Canada took effect and the three countries retaliated, while fears grew that Europe could be Trump’s next target.
– Chinese economy –
Over in Asia, investors welcomed China’s economic targets for the coming year and the prospect of tariff relief, with Hong Kong closing up almost three per cent.
China set an annual growth target of around five per cent and vowed to make domestic demand its main economic driver, as lawmakers attended the annual meeting of the National People’s Congress.
Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four per cent of its GDP this year.
It comes alongside a pledge to create 12 million new jobs in China’s cities and a push for two per cent inflation this year.
The world’s second-largest economy is also planning to increase defence spending by 7.2 per cent, the same as last year.
However, observers have tempered expectations for an expected stimulus given that China is facing strong economic headwinds, especially in light of US tariffs.
These include a persistent property sector debt crisis, stubbornly low consumer demand and stuttering employment for young people.
“We remain sceptical that it will be sufficient to prevent growth from slowing this year, said Julian Evans-Pritchard, China analyst at Capital Economics.
“Especially given the headwinds on the external front and the lack of a more pronounced shift in government spending towards support consumption.”
Elsewhere Wednesday, the share price of Hong Kong firm CK Hutchison soared more than 20 per cent after the company agreed to sell its lucrative Panama Canal ports to a US-led consortium under fierce pressure from Trump.
– Key figures around 1100 GMT –
London – FTSE 100: UP 0.6 per cent at 8,807.74 points
Paris – CAC 40: UP 2.1 per cent at 8,214.04
Frankfurt – DAX: UP 3.5 per cent at 23,097.07
Tokyo – Nikkei 225: UP 0.2 per cent at 37,418.24 (close)
Hong Kong – Hang Seng Index: UP 2.8 per cent at 23,594.21 (close)
Shanghai – Composite: UP 0.5 per cent at 3,341.96 (close)
New York – Dow: DOWN 1.6 percent at 42,520.99 (close)
Euro/dollar: UP at 1.0692 from 1.0485 on Tuesday
Pound/dollar: UP at $1.2825 from $1.2694
Dollar/yen: UP 149.44 from 149.32 yen
Euro/pound: UP at 83.36 pence from 82.60 pence
West Texas Intermediate: DOWN 1.7 percent at $67.12 per barrel
Brent North Sea Crude: DOWN 1.2 per cent at $70.20 per barrel
AFP
