European markets have risen sharply on Wednesday, with futures indicating US stocks will add to yesterday’s rally during the session.
The bullish sentiment has been prompted in large part by comments from President Donald Trump indicating he has no plans to fire Federal Reserve Chair Jerome Powell.
Trump has been at odds with Powell owing to his desire for the Fed to lower interest rates. A US President has no established powers to dismiss a Fed chair before the end of their term in any case. That does not mean it is impossible Powell could be forced out of course.
The second major factor putting the wind in the stockmarket’s sails was a comment from Treasury Secretary Scott Bessent suggesting that a trade deal with China could be on the cards. He described the current high tariffs between the world’s two largest economic powers as ‘unsustainable.’
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Hopes for a reprieve in the trade war are leading to a small swell of investor confidence, with European markets set to ride a wave of gains in early trade.
“While there’s been no concrete decisions to hang the hat of optimism on, Trump has indicated that he is in a mood for negotiation, saying that eventual tariffs on China won’t be as onerous as 145% threatened. US Treasury Secretary Scott Bessent says he’s also expecting a de-escalation in the trade war with China.
“While there had already been expectations of a recalibration, these comments have helped wash away some more pessimistic vibes.
“Worries about Trump wanting to meddle in monetary policy, following his comments about Fed chair Jerome Powell at the weekend appear to be ebbing away, after the President said he had no indication of removing him from office.
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“US stocks look set to add to gains later with Wall Street set for a higher open. Financial markets are adjusting to Trump’s modus operandi which is to speak and act impulsively, and then retract some moves later,” she continued. “Just how much of the damage will linger remains to be seen and markets are likely to stay volatile as trade negotiations play out.”
“European markets including the UK enjoyed a solid bounce following yesterday’s strong rally on Wall Street,” said Russ Mould, investment director at AJ Bell.
“There are several reasons why markets have moved higher. Yesterday, Treasury Secretary Scott Bessent said the trade war between the US and China was unsustainable, with Donald Trump suggesting a deal would be reached between the two countries.
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“Trump also said he doesn’t intend to fire US Federal Reserve chair Jay Powell which has calmed nerves. Previous speculation that Powell might be given the boot caused markets to wobble in the US at the start of the week.
“These comments have given markets a sense of optimism that recent chaos might have peaked and we’re heading towards calmer waters. It almost suggests that someone has taken Trump to one side and told him it’s time to be more responsible with his words and actions.”
