World shares rise after ECB says rate cuts possible

Annabelle Liang, The Associated Press
Published Monday, June 17, 2019 11:52PM EDT
Last Updated Tuesday, June 18, 2019 5:55AM EDT

SINGAPORE -- Global shares climbed on Tuesday after European Central Bank President Mario Draghi said the authority was ready to cut interest rates and provide stimulus if the economy needed it. Traders also focused on rate decisions by the U.S. Federal Reserve and British and Japanese central banks this week.

Speaking at a conference in Portugal on Tuesday, Draghi said that "further cuts in policy rates ... remain part of our tools." He added that "additional stimulus will be required" to boost inflation, and hinted at the possibility of restarting a program to spur bond purchases.

His comments fueled buying in Europe. France's CAC 40 advanced 1.1% to 5,449.21 in early trading and the DAX in Germany jumped 0.8% to 12,181.73. Britain's FTSE 100 picked up 0.6% to 7,400.53. Wall Street was set for slight gains at the open, with the future contract for the S&P 500 index adding 0.3% to 2,905.70. Futures for the Dow also rose 0.3% to 26,208.00.

The U.S. Federal Open Market Committee will hold a two-day meeting starting Tuesday. Traders are keeping a close watch on a policy statement, to be released Wednesday, and a news conference by Fed Chairman Jerome Powell shortly after that.

Powell will likely stick to the theme of a speech he made earlier this month: That the Fed will act if it thinks the Trump administration's trade conflicts are threatening the U.S. economy. Financial markets had rallied on his remarks, which fueled hopes that the Fed would cut interest rates this year.

Although a rate cut isn't expected this time around, fresh comments from Powell could support another wave of buying or have investors swing the other way. Central banks in Britain and Japan will also announce their latest monetary policy decisions this week.

"Global equity markets have overall performed well in June, although the gains have been built on shaky foundations," Lukman Otunuga of FXTM said in a commentary.

"Should central bank policymakers sound less downbeat than the market is expecting and soften speculation of monetary easing, stock markets face the risk of tumbling like a house of cards," he added.

The Reserve Bank of Australia released minutes from a policy meeting in June on Tuesday. The meeting resulted in it easing its cash rate to 1.25%. According to the minutes, members agreed that further rate cuts were "more likely than not" in the period ahead, although there were other ways to reduce unemployment.

Uncertainties surrounding a trade dispute between the U.S. and China continue to put a drag on gains. This could change with a possible meeting between U.S. President Donald Trump and Chinese leader Xi Jinping at the Group of 20 summit in Osaka, Japan, later this month.

Markets in Asia were upbeat. Hong Kong's Hang Seng rebounded 1% to 27,498.77 and the Kospi in South Korea rose 0.4% to 2,098.71. The Shanghai Composite index jumped 0.1% to 2,890.16. Australia's S&P ASX 200 was 0.6% higher at 6,570.00, while Japan's benchmark Nikkei 225 eased 0.7% to 20,972.71. Shares rose in Taiwan and throughout Southeast Asia.

ENERGY: Benchmark U.S. crude dropped 25 cents to $51.68 a barrel. The contract gave up 58 cents to $51.93 a barrel on Monday. Brent crude, the international standard, shed 44 cents to $60.50 a barrel.

CURRENCIES: The dollar slipped to 108.29 yen from 108.53 yen. The euro retreated to $1.1187 from $1.1220.

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