Many stock markets rallied Wednesday, buoyed by Germany's plan to massively boost spending on defence, signals that US President Donald Trump could ease huge tariffs and China's economic targets.
Frankfurt surged three percent in afternoon deals and German bond yields rose after the likely next chancellor, Friedrich Merz, announced the spending plans in the hope of also reviving Europe's biggest economy.
European defence and manufacturing stocks also jumped while the euro rose sharply against the dollar.
The Paris stock exchange gained 1.8 percent while Milan was up 2.4 percent. London advanced 0.2 percent.
"This is huge," Kathleen Brooks, research director at XTB trading platform said in reaction to the news out of Germany.
"For years, economists have said that Germany needed to change its spending rules to get out of the economic hole. It's taken a Conservative chancellor-in-waiting to pull the trigger," she added.
Sentiment during the European and Asian trading sessions were boosted by comments from US Commerce Secretary Howard Lutnick, who said that he thought Trump would "work something out" with regards to Canada and Mexico, whose goods were hit with 25 percent levies.
"Markets would take even the slightest rollback from Trump as a positive sign, helping to settle nerves following concerns about a full-blown trade war," said Russ Mould, investment director at investment platform AJ Bell.
Global stocks tumbled Tuesday after US tariffs on China, Mexico and Canada took effect and the three countries retaliated, while fears grew that Europe could be Trump's next target. Meanwhile US bond yields fell sharply as investors fled to safety from riskier equities.
If no softer US approach to tariffs is announced "then it seems likely that the sell-off will resume," said Trade Nation analyst David Morrison.
Wall Street stocks opened Wednesday with only modest gains after a survey showed a sharp slowdown in hiring by private firms in the United States and fresh comments by Lutnick about possible tariff reductions.
Over in Asia, investors welcomed China's economic targets for the coming year and the prospect of tariff relief, with Hong Kong closing up almost three percent.
China set an annual growth target of around five percent and vowed to make domestic demand its main economic driver, as lawmakers attended the annual meeting of the National People's Congress.
Beijing also announced a rare hike in fiscal funding, allowing its budget deficit to reach four percent of its GDP this year.
It comes alongside a pledge to create 12 million new jobs in China's cities and a push for two percent inflation this year.
The world's second-largest economy is also planning to increase defence spending by 7.2 percent, the same as last year.
But observers have tempered expectations for an expected stimulus given that China is facing strong economic headwinds, especially in light of US tariffs.
These include a persistent property sector debt crisis, stubbornly low consumer demand and stuttering employment for young people.
Elsewhere Wednesday, the share price of Hong Kong firm CK Hutchison soared more than 20 percent after the company agreed to sell its lucrative Panama Canal ports to a US-led consortium under fierce pressure from Trump.
New York - Dow: UP less than 0.1 percent at 42,534.83 points
New York - S&P 500: UP less than 0.1 percent at 5,780.91
New York - Nasdaq Composite: UP 0.2 percent at 18,317.43
London - FTSE 100: UP 0. percent at 8,
Paris - CAC 40: UP 2. percent at 8,
Frankfurt - DAX: UP 3. percent at 23,
Tokyo - Nikkei 225: UP 0.2 percent at 37,418.24 (close)
Hong Kong - Hang Seng Index: UP 2.8 percent at 23,594.21 (close)
Shanghai - Composite: UP 0.5 percent at 3,341.96 (close)
Euro/dollar: UP at 1.0753 from 1.0485 on Tuesday
Pound/dollar: UP at $1.2854 from $1.2694
Dollar/yen: DOWN at 148.73 from 149.32 yen
West Texas Intermediate: DOWN 2.6 percent at $66.51 per barrel
Brent North Sea Crude: DOWN 2.1 percent at $69.58 per barrel
