World stocks go higher as trade fears ease

LONDON — Global stocks shot higher on Thursday as investors judged recent trade war fears were overblown, dealers said.

In Europe, the French and German stock markets both climbed more than 2 per cent, while London rose 1.7 per cent.

Meanwhile, at the opening bell Wall Street added to gains made the previous day, with the Dow rising 0.4 per cent in the first minute of trading.

Tokyo led the gainers in Asia, climbing a solid 1.5 per cent as the more positive market sentiment reduced demand for the haven yen, pushing the currency down. Hong Kong and Shanghai were closed for holidays.

"Investors are expressing confidence that a solution will be found before a full-blown trade war erupts," said Craig Erlam, senior analyst at trading firm Oanda.

However, he also sounded a note of caution over the lingering market concerns.

"The reality is that a trade war remains a real possibility," warned Erlam.

"US President Donald Trump is looking to pick a fight with the world's second largest economy, a fight he believes is easy to win, and China is willing to go toe to toe with the United States — even if it means inflicting harm at home."

The more bullish outlook for stocks came on the heels of a see-saw session on Wall Street on Wednesday that saw equities rally impressively into the close.

Traders have been spooked by tit-for-tat accusations and measures between China and the United States that some fear could lead to a full-blown trade war between the world's top two economies.

China unveiled plans on Wednesday to hit major US exports in retaliation for US tariff plans detailed the day before.

"It's hard to see how anyone wins in this but investors currently, despite the declines we've seen, are expressing confidence that a solution will be found before a full blown trade war erupts," said Erlam.

The Dow whipsawed nearly 800 points between its session low and peak on Wednesday before finishing with a gain of one per cent.

Analysts said the catalyst for the turnaround was comments by recently appointed White House economic adviser Larry Kudlow, who suggested Trump's strident approach to China was a negotiating tactic to win concessions.

"I understand the stock market anxiety. I get that," Kudlow told Fox Business. "I think at the end of this whole process, the end of the rainbow, there's a pot of gold."