Market report: Stocks rebound as Fed hints at rate cut

Global markets bounced back from a near four-month low after the head of the US central bank indicated that he is poised to tackle an economic downturn as recession worries mount.

Federal Reserve chairman Jerome Powell said the central bank’s rate-setters are “closely monitoring” the impact of the trade war and vowed to “act as appropriate to sustain the expansion”.

His speech fuelled speculation that the Fed will be forced to make as many as three cuts to borrowing costs by the end of the year to support the US economy and markets.

Fears that the trade war will tip the world economy into recession sent stocks sliding during a turbulent May. Signs of support from top central banks lifted the mood on markets as attention turned to the European Central Bank’s meeting tomorrow.

The S&P 500surged as much as 1.7pc in afternoon trade as eurozone blue-chip stocks closed 1pc higher. The FTSE 100lagged behind, climbing 29.40 points to 7,214.29, as rate cut speculation boosted sterling’s value against the dollar, curbing the gains of the index’s overseas earners.