World Economy

World Shares Snap Five-Day Losing Streak

World Shares Snap Five-Day Losing StreakWorld Shares Snap Five-Day Losing Streak

World stocks steadied near three-week lows on Wednesday and Chinese markets bounced after recent sharp falls as expectations grew that policy stimulus by Beijing could temper some of the impact from an escalating Sino-US trade conflict.

The dollar too eased off 11-month highs against a currency basket , Wall Street looked set for a stronger opening and MSCI’s all-country equity index snapped a five-day run of losses, rising 0.3%, CNA reported.

Its rebound was fueled by a bounce of almost 1% in MSCI’s non-Japan Asian shares off 6-1/2-month lows , following gains in Hong Kong, Seoul and mainland Chinese indexes .

Assets perceived to be safe, such as the yen, Swiss franc and government bonds of Germany and the United States, took a step back after hefty recent rallies.

“I suspect safe-havens such as Bunds and Treasuries could be put to the test as risk sentiment shows signs of stabilizing,” Commerzbank strategist Rainer Guntermann said.

One catalyst was the expectation, fueled by a Chinese central bank paper, of cuts to banks’ reserve requirement ratios to boost market liquidity and loosen monetary conditions. China’s cabinet on Wednesday pledged to use “targeted RRR cuts”, with cuts now seen as a matter of time.

After lending financial institutions 200 billion yuan ($31 billion) on Tuesday, it soothed markets further by fixing the yuan rate higher against the dollar, after the currency posted its biggest daily fall in 1-1/2 years.

But worries about a fully fledged trade war between the two biggest world economies remain. Washington is threatening tariffs on $200 billion more of Chinese goods and a White House trade adviser said Beijing was underestimating President Donald Trump’s resolve to impose more tariffs.

Tit-for-tat tariffs would hit world growth, company profits and price stability at a time when several big central banks, notably the US Federal Reserve, are in policy tightening mode.

The Asian gains encouraged European bourses to open higher, with a pan-European index up 0.6% after slumping on Tuesday to two-month lows . European auto shares, a sector highly vulnerable to US tariffs, also rose 0.2% though it has lost 2% this week.

Equity futures for New York’s S&P500, Nasdaq and Dow Jones indexes rose as much as half a percent.

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