San Francisco Frontiers - Stocks, oil bounce after tariffs-fuelled rout

After trillions of dollars were wiped from the combined value of global equity markets since last week, share prices across the globe clawed back some ground as investors assessed the possibility of Washington tempering some of the levies.

Wall Street's three main indices gained more than three percent at the opening bell.

"This is a relief trade tied up in the idea that the Trump administration is open to tariff negotiations," said Briefing.com analyst Patrick O'Hare.

Europe's main indices were up around three percent in afternoon trading.

European Union chief Ursula von der Leyen warned against escalating a trade conflict during a phone call with Chinese Premier Li Qiang on Tuesday.

Starting Wednesday, US imports of Chinese products will be hit with a 34-percent tariff while EU goods will be taxed 20 percent.

Beijing plans to retaliate with its own 34-percent tariff on Thursday while the EU will present its countermeasures as soon as next week.

The 27-nation block also plants tariffs of up to 25 percent on US goods in retaliation for levies on steel and aluminium, but it will spare bourbon to shield European wine and spirits from reprisals, according to a document seen by AFP.

- Tokyo rebound -

Tokyo's stock market closed up more than six percent -- recovering much of Monday's drop -- after Japanese Prime Minister Shigeru Ishiba held talks with Trump.

The share price of Nippon Steel rallied by around the same amount after Trump launched a review of its proposed takeover of US Steel that was blocked by his predecessor Joe Biden.

Hong Kong's stock market closed up by more than one percent, having plunged over 13 percent Monday, its biggest one-day retreat since 1997.

"After multiple punishing sessions, stock markets appear to have started their road to recovery," noted Russ Mould, investment director at AJ Bell trading group.

He warned, however, that "it's dangerous to think a massive rally will definitely happen, given how Trump is unpredictable".

Trump said he would impose an additional 50-percent levy on China if Beijing did not heed his warning not to push back against his tariffs.

China fired back that it would "never accept" such a move and called the potential escalation "a mistake on top of a mistake".

- 'Danger of losing control' -

The trade war has put the Federal Reserve in the spotlight as economists said escalation could send prices surging.

US central bank officials are now having to decide whether to cut interest rates to support the economy, or keep them elevated to keep a lid on inflation.

Trade Nation analyst David Morrison said markets have gone from expecting five rate cuts this year to three or four.

"This suggests that fears of a tariff-led economic slowdown 'trump' those of a tariff-led jump in inflation," he said.

Morrison warned of a risk of the stock slump resuming if investors lose confidence in the Trump administration's handling of trade policy.

"In the absence of some tariff clarity and defined purpose from the White House, and soon, the Trump administration is in great danger of losing control," he said.

"If markets perceive this, which they are close to doing, then the derisking will continue," said Morrison, referring to investors selling risk assets like stocks.

- Key figures around 1330 GMT -

New York - Dow: UP 3.6 percent at 39,315.33 points

New York - S&P 500: UP 3.3 percent at 5,231.32

New York - Nasdaq Composite: UP 3.7 percent at 16,184.48

London - FTSE 100: UP 3.4 percent at 7,966.62

Paris - CAC 40: UP 3.4 percent at 7,159.60

Frankfurt - DAX: UP 2.9 percent at 20,365.09

Tokyo - Nikkei 225: UP 6.0 percent at 33,012.58 (close)

Hong Kong - Hang Seng Index: UP 1.5 percent at 20,127.68 (close)

Shanghai - Composite: UP 1.6 percent at 3,145.55 (close)

Euro/dollar: UP at $1.0954 from $1.0904 on Monday

Pound/dollar: UP at $1.2789 from $1.2723

Dollar/yen: DOWN at 147.01 yen from 147.83 yen

Euro/pound: DOWN at 85.66 pence from 85.68 pence

West Texas Intermediate: UP 1.6 percent at $61.64 per barrel

Brent North Sea Crude: UP 1.4 percent at $65.08 per barrel

burs-rl/lth

O.Anderson--SFF