LONDON, Oct 15 (Reuters) - Stocks globally recovered some of their recent losses on Wednesday after comments by U.S. Federal Reserve Chair Jerome Powell boosted investor hopes of further rate cuts this year, pressuring the dollar.
European shares (.STOXX), gained 0.6%, with French stocks (.FCHI), opens new tab adding 2.4% as LVMH (LVMH.PA), shares jumped 12% after the world's largest luxury group reported upbeat earnings, in turn boosting the wider sector.
The positive mood was set to propel Wall Street stocks, too. Nasdaq futures were last up 0.8%, with S&P 500 futures advancing 0.6%.
FED CHAIR POWELL STRIKES DOVISH TONE, MORE CUTS EXPECTED
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 "put December on the map in terms of a halt," they added.
His remarks reinforced expectations of more easing this year, with roughly 48 basis points worth of U.S. cuts priced in by December.
In turn, the U.S. dollar dropped 0.2% against a basket of peers, with the yen and the Australian dollar the standout performers, recovering from steep drops against the dollar last week.
Solid earnings results from U.S. banking giants and an upward revision of the International Monetary Fund's 2025 global growth forecast also underpinned the market.
MARKET SENTIMENT REMAINS FRAGILE
Still, sentiment remained fragile, underscored by safe-haven gold breaking through $4,200 an ounce for the first time to extend its record-breaking run.
Markets have been volatile in recent days, rocked by the escalation in the U.S.-China trade war after U.S. President Donald Trump announced additional 100% duties on Chinese goods in retaliation for Beijing's dramatically expanded export controls on rare earths.
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.
Signs of economic strain flashed in China, too, where deflationary pressures persisted, data showed. Both consumer and producer prices fell in September.
MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), rose 2.1%, with Hong Kong stocks (.HSI), opens new tab adding 2%.
FRENCH BONDS RALLY AS POLITICAL GRIDLOCK AVOIDED
The French government bond risk premium over safe-haven Bunds tightened further, as fading prospects of snap elections eased political risk, even though analysts cautioned the threat may only be postponed.
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.
French 10-year yields fell to 3.37%, the lowest level since August 15, bringing the decline so far this week to 10 basis points, 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 British pound gained 0.2% against the dollar to $1.3349, as finance minister Rachel Reeves confirmed tax rises and spending cuts were on the horizon.
Oil prices slipped as investors weighed predictions of a supply surplus in 2026. Brent crude futures down 0.2% to $62.27 a barrel, while U.S. crude eased 0.1% to $58.63 per barrel.
Reporting by Tom Wilson in London and Rae Wee in Singapore; Editing by Ros Russell and Joe Bavier
