European stocks rallied as cautious optimism about the easing of coronavirus lockdowns around the world helped investors shrug off concerns over escalating US-China tensions.
London’s FTSE 100 gained 1.8 per cent in early trading. Boris Johnson, UK prime minister, indicated on Monday that the country’s economy will open further — if the spread of the virus is contained — with all non-essential retailers able to reopen on June 15.
Economic activity for the week starting May 11 returned to almost 80 per cent of normal, driven by higher retail sales both online and offline, according to analysts at Barclays.
Frankfurt’s Xetra Dax rose 0.8 per cent, after a slight recovery in the GfK German consumer confidence indicator for June suggested a slow rebound has begun in Europe’s largest economy. The continent-wide Stoxx 600 gained 1.1 per cent.
Ian Tomb, analyst at Goldman Sachs, said it was encouraging that countries that were early to lift their lockdown restrictions such as New Zealand had not seen a resurgence in cases so far.
“With coronavirus concerns moderating, limited evidence so far that opening up has triggered fresh medical concerns, and the potential negative effects of lockdowns continuing to accrue, markets have tentatively started to take a more positive view of reopening,” he said.
Futures trading pointed to gains for US stocks when Wall Street reopens later in the day after a public holiday on Monday. S&P 500 futures tipped a 1.9 per cent rise for the Wall Street benchmark on Tuesday.
The positive sentiment comes as the daily death rate in the US from coronavirus hovers at its lowest level in about two months.
Equity markets in Asia rose, despite fears around a national security law that Beijing is set to impose on the semi-autonomous territory. Hong Kong’s Hang Seng index added 1.9 per cent.
China on Monday sought to reassure international investors that the proposed law, which sparked mass protests in the Asian financial hub and a sell-off in the local stock market, will improve Hong Kong’s business environment.
But investors are concerned that the law could provoke a backlash from the US as friction increases between Washington and Beijing. Mike Pompeo, US secretary of state, has called the law a “death knell” for autonomy in Hong Kong.
However, “markets seem increasingly inclined to ignore” trade rhetoric between the US and China that is not backed up by action, said Paul Donovan, chief economist at UBS Global Wealth Management.
Elsewhere in the region, Japan’s benchmark Topix index added 2.2 per cent after Asia’s second-largest economy lifted a nationwide state of emergency designed to control the spread of Covid-19.
South Korea’s Kospi gained 1.7 per cent and Australia’s S&P/ASX 200 added 2.9 per cent. China’s CSI 300 of Shanghai and Shenzhen-listed stocks climbed 1.1 per cent.
Oil prices were higher with Brent crude, the international benchmark, up 1.6 per cent at around $36 a barrel. West Texas Intermediate, the US marker, climbed 2.7 per cent to just above $34 a barrel.