Global stocks extend rally on brightening economic picture

Global stock markets extended their rally on Thursday as hopes for a swift economic recovery following the coronavirus pandemic outweighed concerns over widescale US unrest and simmering geopolitical tensions.

In early trading in the Asia-Pacific region, Hong Kong’s benchmark Hang Seng index rose 1.3 per cent while Japan’s Topix gained 0.5 per cent. Both South Korea’s Kospi and Australia’s S&P/ASX 200 climbed more than 1 per cent.

Overnight in the US, the S&P 500 closed up 1.4 per cent to notch a fourth consecutive day of gains as economic data showed an improved global picture from April. Futures tipped the S&P 500 to slip 0.1 per cent when trading begins on Wall Street later in the day.

The gains for Asian equities came ahead of the European Central Bank’s monetary policy meeting on Thursday, which will focus on economic growth projections for the eurozone and the possible extension of the bank’s €750bn bond-buying programme, known as PEPP.

The ECB is widely expected to extend the programme, which at its current pace of around €30bn a month will run out of firepower by October. Futures trading suggested that European markets would open little changed later day.

Marchel Alexandrovich, senior European economist at Jefferies, said that while “there is no immediate need to announce further [monetary easing] for a few months yet, neither is there a reason to delay the inevitable, and a €500bn boost to PEPP will confirm the ECB’s commitment to staying active in the markets into next year”.

The current rally in equity markets has shown little sign of losing steam despite a growing menu of risks.

In recent days the US has been rocked by nationwide protests sparked by the death of George Floyd, a black man in Minnesota, who was suffocated by a Minneapolis police officer.

“Economies are gradually lifting lockdowns, ending states of emergency and easing restrictions. But just as equity markets start to recover, another crisis looms: escalating tensions between the US and China,” said Frank Benzimra, a strategist at Société Générale.

The Trump administration on Wednesday moved to block Chinese airlines from operating in American airspace unless Beijing relaxes restrictions on US airlines. That hit the Hong Kong-listed shares in Chinese carriers, with Air China and China Southern both falling by about 1.8 per cent on Thursday.

Oil prices continued to lose ground after Brent crude, the international benchmark, failed to close above $40 a barrel on Wednesday on signs that not all members of the Opec+ production alliance were willing to extend current output cuts.

Brent fell 0.7 per cent in Asian trading on Thursday to $39.52. US marker West Texas Intermediate dropped 1.2 per cent to $36.83.

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