Global shares inch higher as monetary hopes spur rebound

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European shares followed their Asian counterparts higher on Tuesday as investors bet possible monetary and fiscal stimulus measures would help stave off a major global economic downturn.

After a tumultuous first half of August as investors dumped equities and poured their money into government debt and other safe haven assets, some calm has returned to markets this week as traders welcomed talk of more stimulus in China and Germany.

In early European trade, the pan-region Euro Stoxx 600 rose 0.2%, the German DAX gained 0.1%, and Britain’s FTSE rose 0.36%. That followed gains in Asia.

The MSCI world equity index, which tracks shares in 47 countries, rose 0.1% and followed a decent rebound on Monday.

“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, while Germany’s right-left coalition government has said it would be prepared to ditch its balanced budget rule and take on new debt to counter a possible recession.

The immediate focus now shifts to the minutes of the U.S. Federal Reserve’s last meeting due on Wednesday.

Traders are also keenly waiting on the Fed’s Jackson Hole seminar and a Group of Seven summit this weekend for clues on what additional steps policymakers will take to bolster growth.

Peace PIAK