Stock markets edged higher on Tuesday as investors welcomed signs that more monetary and fiscal stimulus was on its way, hoping more easing would help stave off a major global economic downturn.
After a tumultuous first half of August when investors dumped equities and poured their money into government debt and other safe havens, some calm has returned to markets this week amid talk of more stimulus in China and Germany.
The pan-region Euro Stoxx 600 eked out gains of 0.1%, following on from Monday’s rally, while France’s CAC 40 climbed 0.13% and Britain’s FTSE 100 0.4%. Germany’s DAX was modestly lower, however.
The MSCI world equity index, which tracks shares in 47 countries, rose 0.1%, although the index remains down more than 3% so far in August.
Futures markets point to Wall Street opening more or less flat on Tuesday.
Investors have this week cheered signs that policymakers are willing to do more to support their economies and counter the damage caused by international trade frictions, led by the bruising Sino-U.S. trade war.
And not everyone thinks the economy is in as bad a shape as the recent market sell-off – which accelerated last week after short-term borrowing costs in the United States rose above longer-term yields in a possible recession signal – has implied.
“We still see limited near-term recession risks as central banks’ dovish pivot helps stretch the economic cycle, yet caution that trade and geopolitical tensions pose downside risks,” strategists at BlackRock Investment Institute said in their weekly research note.
China’s new lending reference rate was set slightly lower on Tuesday after the central bank announced interest rate reforms designed to reduce corporate borrowing costs.
Meanwhile Germany’s coalition government has said it would be prepared to ditch its balanced budget rule to counter a possible recession.