Stock markets rose yesterday, after Federal Reserve chief Jerome Powell all but flicked the switch on a US interest rate cut at the end of the month.
After big losses at the start of the week, trading floors have been much more upbeat since a two-day congressional testimony in which Mr Powell hinted at a possible reduction in borrowing costs, with markets now betting on the size of the anticipated cut.
After the Dow stocks index pushed above 27,000 points for the first time on Thursday positive sentiment filtered through to Asia and Europe yesterday.
US stocks continued to rally yesterday at the opening bell, with the Dow adding 0.3 per cent.
“Dealers remain divided as to the size of the (Fed) cut... but the view across the board is that monetary policy will be loosened,” said analyst David Madden at CMC Markets UK.
Further stock market gains came despite unease caused by US President Donald Trump accusing China of backsliding on a trade promise – just days after the two sides tentatively began telephone talks on resolving their tariffs war.
Meanwhile, China’s economy grew at its slowest rate in nearly three decades in the second quarter, hit by the US-China trade war and weakening global demand, according to an AFP survey of analysts.
The world’s second largest economy expanded 6.2 per cent in April-June, the poll of 10 economists estimated, ahead of the official release of gross domestic product figures Monday.
Elsewhere, geopolitical tensions after armed Iranian boats threatened a British oil tanker earlier in the week provided support for oil prices, although gains were limited by longer-term oversupply concerns.
Iran’s menacing of the BP supertanker on Wednesday appeared to be in retaliation for Britain’s seizure of the Iranian Grace 1 tanker off Gibraltar on July 4.
“With Iran seeking retribution for the UK’s actions around Gibraltar, there is a distinct possibility that we could see an upside shock to prices,” said IG trading group analyst Joshua Mahony.
“That being said, in the absence of such shocks, US production is likely to remain a drag on prices.”
Iran’s Revolutionary Guards denied involvement in the British Heritage incident but said the United States and Britain would “strongly regret” British detention of the fully-loaded Iranian tanker off Gibraltar for violating sanctions on Syria, allegedly the planned recipient of its cargo.
Britain said yesterday it will send a second warship to the Gulf, while the Pentagon said Thursday it was discussing military escorts for vessels in the Gulf.
But the rises in oil prices as a result of the incident have been capped by an oversupplied oil market, according to traders.
And the IEA yesterday said the recent decision by oil producing countries to prolong cuts in output will not fundamentally change the outlook for the market.