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Global Stocks Buoyed by Wall Street Optimism

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Global stocks hit their highest levels in more than six months on Friday as investors took the view that the latest exchange of tariffs between the United States and China may be less damaging than initially feared.

European stocks strongly extended a relief rally that began on Wall Street overnight and ran through Asian markets, with the pan-European STOXX 600 index up 0.4 percent by 1223 GMT. Futures indicated a higher open on Wall Street.

A rally in Chinese markets helped lift the MSCI’s broadest index of Asia-Pacific shares outside Japan 1.27 percent, partly on expectations that Beijing will pump more money into its economy to weather the trade war. The index has risen 4.6 percent from a 14-month low on Sept. 12.

The CSI 300 index of Shanghai and Shenzen shares, which fell to a two-year low last week, rose 3 percent, putting it on course for its largest weekly gain for more than two years.

Japan’s Nikkei rose 0.8 percent, hitting an eight-month high.

The broad strength across markets helped MSCI’s All-Country World Index, which tracks shares in 47 countries, hit its highest level since March 13. The index was last up 0.4 percent on the day, and was set to post its biggest weekly gain since early May.

On Wall Street, trade-sensitive industrial stocks led the gains on Thursday. The Dow Jones Industrial Average rose 0.95 percent while the S&P 500 gained 0.78 percent, both hitting record highs.

The latest rally came after new U.S. and Chinese tariffs on each other’s goods were set at lower rates this week than previously expected, raising hopes that row between the world’s two largest economies may be easing.

Chinese Premier Li Keqiang pledged this week that Beijing will not engage in competitive currency devaluation, news that also helped calm investors.

“The tariffs that were announced by both sides during the week were deemed to be not as harsh as originally suspected,” CMC Markets markets analyst David Madden said.

“The U.S., in particular, showed restraint, but that was partially so the Trump administration would have more ammunition should they feel it is required down the line. Now that the latest series of tariffs are out of the way, investors fell back into their bullish routine.”

Despite growing anecdotal reports from companies on both sides of the Pacific that the trade war is starting to affect their operations, the outlook for corporate profits remained solid in many markets on the back of strong global growth, keeping equity valuations relatively attractive.

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