Global stocks recouped some of their recent losses on Wednesday following comments by U.S. Federal Reserve (Fed) Chair Jerome Powell – seen as dovish, as they signaled more cuts may be on the way – and a slate of positive bank earnings on Wall Street, while the dollar lost ground.
European shares gained 0.7%, with French stocks adding 2.4% as LVMH shares jumped 12% after the world's largest luxury group reported upbeat earnings, in turn boosting the wider sector.
Powell on Tuesday left the door open to further rate cuts and said the end of the central bank's long-running effort to shrink the size of its holdings may be coming into view.
Powell "struck a more dovish tone than expected," Deutsche Bank analysts wrote. His comments on ending the shrinking of the Fed balance sheet in the coming months "puts December on the map in terms of a halt," they added.
His comments lifted markets and reinforced expectations of more easing this year, with roughly 48 basis points worth of U.S. rate cuts priced in by December.
In turn, the U.S. dollar dropped 0.3% against a basket of peers, with the yen and the Australian dollar the standout performers as both recovered from steep drops against the dollar last week.
Wall Street futures were set for gains, with Nasdaq futures up 0.5% and S&P 500 futures advancing 0.4%.
Solid earnings results from U.S. banking giants and an upward revision of the International Monetary Fund's (IMF) 2025 global growth forecast also underpinned the market, which had taken a nosedive earlier in the week on renewed signs of strain in U.S.-China trade relations.
Yet market sentiment remained fragile.
Markets have been volatile in recent days, rocked by the escalation in the U.S.-China trade war after Trump announced additional 100% duties on Chinese goods in retaliation for Beijing's dramatically expanded export controls on rare earths.
U.S. President Donald Trump said on Tuesday that Washington was considering terminating some trade ties with China, while the U.S. and China also began charging additional port fees on ocean shipping firms.
"It does suggest that a lasting truce is not going to be easy to achieve. But it's also a reminder as well, that the market does need to be mindful that... they shoot these arrows and then they sort of walk them back," said Tony Sycamore, a market analyst at IG.
In China, deflationary pressures persisted, data showed, with both consumer and producer prices falling in September.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 2.1%, with Hong Kong stocks adding 2%.
In France, Prime Minister Sebastien Lecornu promised on Tuesday to suspend a landmark pension reform until after the 2027 election, avoiding more political gridlock in the EU's second-biggest economy and providing some relief to investors.
French bonds rallied for a second day, pushing yields to their lowest in two months. Ten-year yields fell to 3.37%, the lowest since August 15, and were heading for the largest weekly decline since May.
"I think anything that will bring some relief to the back-and-forth within the French parliament is an absolute win," said Juan Perez, director of trading at Monex USA.
The euro was last 0.2% higher at $1.163. The single currency has largely been insulated from France's political turmoil.
Elsewhere, spot gold broke through $4,200 an ounce for the first time, extending its record-breaking run, as it was helped by geopolitical and economic uncertainties and the U.S. rate cut expectations.
Oil prices slipped, with Brent crude futures down 0.2% to $62.27 a barrel, while U.S. crude eased 0.1% to $58.63 per barrel.
