Wall Street was close to turning positive for the year on Monday, as the unexpected rise in employment in the US on Friday continued to power the remarkable rally in global stocks.
The S&P 500 opened about 0.4 per cent higher, building on the latest leg of a rally that began with data revealing that 2.5m people had returned to work in the US last month.
The US benchmark index has climbed more than 40 per cent from its mid-March low and is only 1 per cent shy of turning positive for the year, despite the coronavirus pandemic and civil unrest triggered by the killing of George Floyd.
“What is clearly happening is the excitement of reopening is allowing a lot of these companies that have been casualties of Covid to come back and come back in force,” said Stanley Druckenmiller, a former hedge fund manager, in an interview on CNBC.
“I would also say I underestimated how many red lines, and how far, the Fed would go,” added Mr Druckenmiller.
In Europe, stocks failed on Monday to build on recent gains, as a historic 18 per cent contraction in German industrial output in May shook investors’ confidence that there would be a swift recovery from the pandemic.
After an early wobble, London’s FTSE 100 was up 0.1 per cent. The continent-wide Euro Stoxx 600 index fell 0.2 per cent while Frankfurt’s Xetra Dax gained 0.1 per cent.
Last week the European stocks benchmark made one of its largest weekly percentage gains since 2011. After the near-40 per cent drop from late February to mid-March, the Euro Stoxx 600 now stands 9.8 per cent lower for the year.
But growing doubts over the Franco-German proposal for mutualised debt to help hard-hit southern European states and the fall in German industrial output have damped hopes of a quick economic recovery.
“At least for German industry, the period after the imminent rebound does not look too promising,” said Carsten Brzeski, chief economist for the eurozone at ING.
“Contrary to the financial crisis and the important role of Asian countries in the swift recovery of German industry back then, there is currently no saviour in sight to quickly boost external demand,” he added.
Yields on German Bunds — the benchmark for the eurozone — were steady at around their highest level in two months after rising last week as investors sold haven assets following the European Central Bank’s announcement of further support measures to tackle the pandemic.
European travel stocks continued to push higher, with the sector up 0.7 per cent on Monday and almost 80 per cent up from the March lows. But travel shares still remain deeply depressed compared with pre-crisis levels.
In the Asia-Pacific region, Japan’s benchmark Topix rose 1.1 per cent while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks added 0.5 per cent. Hong Kong’s Hang Seng was little changed.
Official Chinese data over the weekend showed that exports shrank 3.3 per cent in May in dollar terms, significantly less than the contraction forecast by economists. But imports fell more than anticipated due to weak local demand, raising questions over the pace of the country’s economic recovery from the virus.
In Japan, economic figures published on Monday showed that the world’s third-largest economy shrank at an annualised rate of 2.2 per cent in the first quarter of 2020, compared with initial estimates of a 3.4 per cent decline. That suggested the country’s economic situation before the coronavirus outbreak may not have been as dire as thought.
Oil prices fell after Saudi Arabia said that the extension of Opec+ production cuts until the end of July would not include voluntary curbs by a trio of Gulf producers. Brent crude was down 1.7 per cent at $41.57 a barrel while US marker West Texas Intermediate slipped 2.2 per cent to $38.66 per barrel.
Additional reporting by Robin Harding in Tokyo