Global shares begin second half with a whimper despite positive data

LONDON (Reuters) – Global stocks struggled for momentum on Wednesday as improving economic data was offset by concern that surging coronavirus cases in the United States could derail the world’s recovery before it properly begins.

Germany’s manufacturing sector contracted at a slower pace in June, while French factory activity rebounded into growth, data showed.

German retail sales rose sharply in May, reflecting a rebound in private consumption, while a recovery in China’s factory activity offered further signs that the world’s second largest economy may have passed the worst of the devastation caused by the pandemic.

Germany’s jobless rate rose by 69,000 in June, far less than expected. Economic institute Ifo said Europe’s largest economy will gradually recover after the slump caused by the pandemic and will likely return to last year’s level at the end of 2021.

Coronavirus cases surged, with the United States recording 47,000 infections on Tuesday, its biggest single-day spike since the pandemic began.

MSCI’s world shares index was 0.1% higher after rising 18% for its biggest three-month gain since 2009 in the second quarter, but it still closed the first half around 8% lower from where it started the year.

After their best quarter since March 2015, European stocks opened firmer, with the broader Euro STOXX 600 gaining 0.3%.

“We are at the beginning of the quarter but it doesn’t look very different from where we left the last one,” said François Savary, chief investment officer at Swiss wealth manager Prime Partners, predicting “a further consolidation over the summer.”

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%, led by gains in China. E-Mini futures for the S&P 500 were down 0.2%.

It followed a strong finish to the quarter on Wall Street but also a loss of momentum in recent weeks as U.S. infection rates have surged, with some states reimposing restrictions on business and personal activity.

The S&P 500 index rose 1.5% for an almost 20% gain over the past three months, fuelled by unprecedented central bank stimulus and hopes for a swift pandemic recovery, but it rose only 1.8% in June.

Coronavirus cases more than doubled in 14 U.S. states last month, a Reuters analysis showed, and fears are growing that the caseload could prompt fresh lockdowns.

“The rise in COVID-19 infections is now triggering a reversal on the reopening strategy,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney. “It remains to be seen if the U.S economy will continue to surprise over the coming month.”

The U.S. government bond market remains in a cautious mood. Yields on benchmark 10-year government debt rose overnight to 0.6774%, but finished the quarter steady.

In Europe, Germany’s 10-year yield rose to a one-week high, rising 2 basis points on the day to -0.44, helped by better than expected German retail sales. [L8N2E815P]


China’s introduction of sweeping new laws to crack down on dissent in Hong Kong also has investors eying geopolitical tensions with trepidation.

The laws have prompted fresh protests in the city and Washington has begun dismantling Hong Kong’s special status under U.S. law.

“It’s one of a number of geopolitical factors which is a negative for some asset classes now,” said Imre Speizer, a foreign exchange strategist at Westpac in Auckland.

Currency markets were in a holding pattern before the next slew of data due to provide a snapshot of the U.S. recovery.

The dollar rose overnight but edged back down in early London trading, before U.S. manufacturing PMI and unemployment data. The euro was broadly flat on the day, at $1.12275.

U.S. manufacturing activity data on Wednesday is forecast to show a recovery from an 11-year low in April while the non-farm payrolls report on Thursday is expected to show the economy added 3 million jobs in June.

Gold hovered near an 8-year high at $1787.86 an ounce. [GOL/]

Brent crude rose 2.5% to $42.32 a barrel, while U.S. crude was up 2.7% at $40.31 a barrel after an industry report showed crude stockpiles in the U.S. staged a bigger drop than expected. [O/R]

Graphic: World FX rates in 2020 here

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Shares rise on upbeat data but COVID-19 spike dampens sentiment

NEW YORK (Reuters) – A global gauge of stock markets rose on Tuesday as investors continued to look for signs of an economic recovery while Treasury debt prices were little changed amid a fog of rising COVID-19 cases.

The possible return of Libyan oil production, which has been down to a trickle since the start of the year, weighed on crude prices.

World shares are down around 8% so far this year, having slumped 34% between Feb. 12 and March 23, but the world equity index is up 18% this quarter – on track for its biggest three-month gain since the second quarter of 2009.

U.S. consumer confidence rose more than expected in June, following upbeat real estate data on Monday.

Some traders said quarter-end flows were also supportive of stock prices. Wall Street was setting up to close the quarter with the largest gains since 1998.

“We are finishing up one of the best quarters in history, so we wouldn’t be surprised to see a little bit of window dressing taking place on the last day,” said Sal Bruno, chief investment officer at IndexIQ in New York.

The Dow Jones Industrial Average rose 79.57 points, or 0.31%, to 25,675.37, the S&P 500 gained 30.9 points, or 1.01%, to 3,084.14 and the Nasdaq Composite added 145.76 points, or 1.48%, to 10,019.91.

The pan-European STOXX 600 index rose 0.13% and MSCI’s gauge of stocks across the globe gained 0.80%.

Emerging market stocks rose 0.31%. Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.8% higher, while Japan’s Nikkei rose 1.33%.

Rising COVID-19 cases continue to show signs of a second deadly wave of the pandemic, but markets still expect a global economic recovery as lockdown measures ease.

Brent crude slipped as traders took profits from the previous session and Libya’s state oil company flagged progress in talks to resume exports, potentially boosting supply.

U.S. crude recently fell 0.23% to $39.61 per barrel and Brent was at $41.17, down 1.29% on the day.

U.S. Treasury yields were little changed even as stocks rose as investors fixated on a continued surge in U.S. coronavirus cases.

“It’s not that we’re not looking at the (economic data) numbers anymore. But if we’re getting data from May and early June, they might not matter as much if we’re seeing cases rise,” said Collin Martin, fixed income strategist at Schwab Center for Financial Research in New York.

The dollar index was in and out of negative territory as upbeat U.S. and Chinese data left traders torn between optimism about global growth and fears that a surge in new COVID-19 cases could jeopardize the rebound.

The dollar index fell 0.091%, with the euro up 0.05% to $1.1246.

The Japanese yen weakened 0.20% versus the greenback at 107.77 per dollar, while Sterling was last trading at $1.2373, up 0.63% on the day.

Beijing unveiled the national security law it is imposing on Hong Kong, punishing crimes of secession and sedition with up to life in prison, a move expected to ratchet up tensions with the United States, Britain and other Western governments.

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Stocks going nowhere as virus fears hold optimism in check

SINGAPORE/NEW YORK (Reuters) – Asian stock markets ground higher on Friday, and are set to end a choppy week more or less where they began it as surging coronavirus infections cast a shadow over encouraging economic data and checked hopes for a swift global recovery.

MSCI’s broadest index of Asia-Pacific shares outside Japan MIAPJ0000PUS rose 0.3%, for a weekly gain of around 0.5%. Japan’s Nikkei .N225 rose 1% to sit flat for the week.

Bulls seem to have the upper hand in currency markets, with the U.S. dollar down 0.3% for the week, and riskier currencies such as the Australian dollar marginally ahead. Majors were steady in morning trade on Friday.

“The market probably ran ahead of itself anticipating a smooth recovery, which has set us up for the rougher period we’re now going through,” said Shane Oliver, chief economist at AMP Capital in Sydney.

“We’re stuck in a bit of a range. There’s a degree of optimism that any second wave will be offset by stimulus … but if we have to go back to a renewed lockdown then it’s a different story, and markets face a lot more downside risk.”

The moves followed a bumpy session on Wall Street, which finished in positive territory after a late surge led by banking stocks. Financials caught a boost from a relaxation in some capital requirements that ought to free up cash for lending.

Still, volumes were light and plenty of headwinds remain.

The governor of Texas paused the state’s reopening on Thursday as COVID-19 infections and hospitalizations surged and the country set a new record for a one-day increase in cases.

Localised restrictions to slow the virus have now been re-imposed in parts of Lisbon in Portugal, western Germany, Australia’s Victoria state and Beijing.

The U.S. Senate has also passed legislation that would impose mandatory sanctions on people or companies that back efforts by China to restrict Hong Kong’s autonomy, yet another potential Sino-U.S. flashpoint.

To become law it must also pass the House and be signed by President Donald Trump.

Hong Kong’s Hang Seng index .HSI fell 0.4% in early trade on Friday, after being closed for a holiday on Thursday. Markets in China and Taiwan remain closed.

The U.S. Treasury market was quiet, with the yield on benchmark 10-year Treasuries US10YT=RR steady at 0.6790%. Gold XAU= held steady at $1,761.39 an ounce. [US/] [GOL/]


The tug of war between bulls and bears this week has sent the S&P 500 .SPX ahead by as far 1.8% and down by as much as 2.4% on the week, with Thursday’s gains leaving it flat. U.S. stock futures ESc1 were flat on Friday.

Foreign exchange markets have likewise stalled, as the virus’ progress dents confidence in bets on further gains in hard-running riskier currencies.

“Having risen for three straight months, some payback may be due for stocks and currencies in July,” strategists at Singapore’s DBS Bank said in a note on Friday.

“We would avoid currencies – Indonesian rupiah, Australian dollar and New Zealand dollar – that appreciated most in June and Q2.”

Moves in majors were small on Friday, with the Aussie AUD=D3 steady at $0.6883, up 0.8% for the week, and the kiwi NZD=D3 flat at $0.6431 and steady for the week. The Aussie has rallied 25% from March lows and the kiwi 18%. [AUD/]

After a mixed bag of U.S. data overnight, with a smaller-than-expected drop in jobless claims but robust rise in goods orders, markets are looking for reassurance from European confidence surveys and U.S. spending data due later on Friday.

Oil prices, a barometer of energy consumption and so the global growth outlook, edged ahead to hold steady for the week.

U.S. crude CLc1 futures were last up 1.2% or 46 cents to $39.18 per barrel and Brent futures LCOc1 rose 1.3% to $41.58 per barrel.

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Asian stocks set for cautious gains after choppy Wall Street session

NEW YORK (Reuters) – Asian stocks were set to gain on Friday, as global sentiment remained doggedly upbeat despite increased volatility and rising new coronavirus infections, with Wall Street pushed higher by a loosening in bank regulations.

Throwing some cold water on the rally, however, were the U.S. Federal Reserve’s capital limits for banks after its stress tests on the sector revealed key vulnerabilities.

“Futures are pointing to gains, it’s just a question of how they interpret the latest directive from the U.S. Federal Reserve,” said Tom Piotrowski, a markets analyst at Australian broker CommSec. “We could see a flow-on effect of regulators stepping in and making sure banks maintain financial health now that we see the pandemic take on different qualities, with the challenges drawn out over a long period of time.”

The Fed on Thursday said it will cap big bank dividend payments and halt share repurchases until at least the fourth quarter. It found lenders faced significant capital losses when tested against an economic downturn caused by the coronavirus pandemic.

Australian S&P/ASX 200 futures YAPcm1 rose 1.21% in early trading. Japan’s Nikkei 225 futures NKc1 added 0.13%. Hong Kong’s Hang Seng index futures .HSI HSIc1 lost 0.93%. Hong Kong was closed for a public holiday on Thursday and markets in mainland China continue their break on Friday.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.45%.

Coronavirus cases across the United States have soared in recent days, with Texas pausing its re-opening as COVID-19 infections and hospitalizations surged in the state.

On Wall Street, the Dow Jones Industrial Average .DJI rose 1.18%, the S&P 500 .SPX gained 1.10% and the Nasdaq Composite .IXIC added 1.09%.

The gains were due in part to earlier announcements from U.S. regulators loosening rules to allow banks to make larger investments in riskier vehicles such as venture capital funds.

“Investors continue to grapple with mostly negative U.S. virus news, which continue to suggest there is an increasing risk reopening plans in the U.S. economy could be reversed,” the National Australia Bank wrote in a research note. “But as we have seen before, news of more supportive measures have yet again propped up the equity market.”

The U.S. dollar strengthened on Thursday due to fears of rising coronavirus cases. The dollar index =USD rose 0.123%.

Oil prices rose about 2% in a volatile session, boosted by signs of a small rise in fuel demand but offset by rising coronavirus cases.

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