The world could do with a little more magic as it faces up to grinding poverty and extreme inequality, three-time Oscar winner Steven Spielberg said on Saturday as he launched his new fantasy adventure film at the Cannes Film Festival.

"All of us believe in magic," said Spielberg at a press conference marking the premiere of his movie The BFG, based on British writer Roald Dahl's beloved children's classic.

"The worse the world gets, the more we have to believe in magic," he said, answering a question about whether he was troubled by the sight of beggars and migrants selling cheap goods on Cannes' streets.

"Hope is everything for me," said Spielberg, who is one of the towering figures of modern cinema.

The BFG stars 11-year-old British newcomer Ruby Barnhill as Sophie, a young orphan who gets whisked away to a land brimming with giants.

"The only thing that I’d ever done before this was going to a drama class for a very long time, and doing a children's TV show," said Barnhill. "It's amazing to think that I’m here now. It's a dream come true."

The BFG is the latest work in the 69-year-old director and producer's more-than-four-decade-long filmmaking career, during which he has touched on almost every genre and brought to the screen an extraordinary range of stories.

His movies include Hollywood blockbusters such as the Indiana Jones series, E.T. and Jaws, through to historically themed films like Schindler's List, wartime dramas such as Saving Private Ryan and a Cold War story Bridge of Spies.

But his Cannes press conference was somewhat overshadowed when he was confronted with allegations about Dahl's anti-Semitism. Dahl died in 1990.

"I was not aware of Dahl's personal stories," said Spielberg. "I had no idea about what was reportedly assigned to him."

He went on to say: "I was focused on this story he wrote. This is a story about embracing our differences."

Spielberg, who turns 70 this year, also made clear that he had no plans to retire.

"This is something I'm going to do for the rest of my life," he said. He has several other new projects in the pipeline.

The BFG also reunited Spielberg with the late US scriptwriter Melissa Mathison, who authored E.T., which also premiered at Cannes in 1982.

Spielberg's The BFG has a distinctly British tone, with Downton Abby star Penelope Wilton playing the Queen. "I have given the Queen a good rendition," Wilton told the press conference.

"She has been played a lot," she said. "We'll see how it goes down."

The BFG is being screened in Cannes as an out-of-competition film, which means it is not in the running for any of the festival's prestigious prizes, including the Palme d'Or for best picture.

The BFG premiere is nonetheless one of the big events in Cannes this year, with the film expected to be a major summer hit and expected to be one of the biggest grossing films of 2016.

Saturday also marked the screening of two of the 21 movies vying for the Palme d'Or, including German director Maren Ade's comedy about the relationship between a high-flying corporate adviser and her prankster father.

The film, Toni Erdmann, which was the first German film to be screened in Cannes' main competition in 8 years, has emerged as an early favourite for the festival's coveted prize.

This is unlike South Korean director Park Chan-wook, who is a Cannes regular and whose latest film, an erotic thriller called The Handmaiden, also premiered on Saturday.

Set during the Japanese occupation of Korea in the first half of the last century, The Handmaiden is a sexually charged story about a servant girl who is enlisted by a conman to win trust of a wealthy heiress. However, his plans seems to go awry when the two women plunge into a passionate affair.

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