Global stocks gain in Fed's slipstream, dollar subdued

Global stocks gained for a third straight day on Wednesday, bolstered by investors' growing hopes that the Federal Reserve might cut interest rates this year to boost a slowing global economy.

Interest rate futures show the U.S. central bank will start cutting rates as soon as next month, with as many as three rate cuts priced by year-end.

Fed Chairman Jerome Powell said the central bank was watching the fallout from the trade war and would react as appropriate. Stock markets responded positively to Powell's comments, with U.S. stocks registering their most significant one-day gains in 5 months.

The optimism rolled over into markets on Wednesday, with the MSCI All-Country World Index up 0.4% after the start of European trading, adding further to a 1.4% gain on Tuesday.

China's dominance as a supplier of rare earths could be a vital bargaining chip in the trade war with the U.S.The International Monetary Fund (IMF) cut its 2019 economic growth forecast for China to 6.2%.

European markets opened flat to marginally higher, but most bourses were barring Britain's FTSE 100 registered gains of nearly 0.5% by 0807 GMT. The pan-European STOXX 600 index was up 0.5%.

Italy's 10-year government bond yield is down 14 basis points this week so far at 2.52%, even though the European Union may start proceedings this week to fine Italy for breaching debt limits.

In currencies, the Fed comments weakened the dollar for a fifth consecutive day, lifting the euro and pushing investors into safe-haven assets including the Japanese yen. The dollar struggled near a seven-week low.