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Economy

EMERGING MARKETS-Oil-linked Latam currencies outperform for week

    * Colombian, Mexican pesos lead weekly gains
    * Chilean stocks outperform for the week
    * Argentine assets sole losers for the week

 (Updates prices, adds comments)
    By Ambar Warrick and Shreyashi Sanyal
    July 3 (Reuters) - Latin American stocks and currencies
remained muted on Friday as a U.S. holiday provided few trading
cues, but were set to end the week with gains as bets grew for a
recovery from the economic effects of the COVID-19 pandemic. 
    Strong economic readings from China and the United States
through the week had helped bolster risk appetite, although a
drastic rise in coronavirus cases capped broader gains.
    Still, the positive news drove gains in commodity markets,
which in turn saw oil and metal-linked assets in Latin America
outperform for the week. It also helped regional risk assets
weather a raft of weak local economic data.    
    The currencies of oil exporters Colombia and Mexico
 were set to outperform regional peers for the week,
riding on strength in the crude market as bets for demand
recovery grew.
    
    "Following a precipitous decline in global and emerging
markets activity in Q2, we expect growth across EM economies to
bounce back relatively sharply towards the end of this year and
into 2021," analysts at Goldman Sachs wrote in a client note.  
    Brazil's real edged up for the day, while stocks
 fell after data showed economic activity in the country
shrank in June for a fourth straight month due to coronavirus.
    The reading was slightly stronger than the prior month, as
Latin America's largest economy slowly ground back into gear
from coronavirus-related lockdowns.
    The real and Brazilian stocks added 3% for the week.
    Copper exporter Chile's stocks outperformed
regional peers for the week with a 5.3% gain. The peso
had also benefited from stronger copper prices through the week.
    Still, economic activity in the world's largest copper
producer remained constrained due to the coronavirus.
    Investors continued to watch for increasing infections as
major economies scaled back virus-related curbs. While reopening
has helped economic activity recover, it also leaves the door
open for future lockdowns if infections continue to spike.
    "This is not a 'bubble, burst bubble, sort out bubble,
recover' cycle. This is an abrupt switching off of economies,
followed by a relatively abrupt switching back on. Companies and
consumers are not likely to react as they have in the past,"
wrote Paul Donovan, Chief Economist of UBS Global Wealth
Management.
    Argentine stocks and the peso were the sole
weekly losers in Latin America. Investors continued to fret over
the country's negotiations over the repayment of its distressed
bonds, with a deadline for a deal looming later in the month.
    Key Latin American stock indexes and currencies at 1957 GMT:
    
     Stock indexes             Latest    Daily %
                                          change
 MSCI Emerging Markets          1033.29      0.96
                                         
 MSCI LatAm                     1954.72      0.74
                                         
 Brazil Bovespa                96657.46      0.44
                                         
 Mexico IPC                    37812.52     -0.22
                                         
 Chile IPSA                     4203.80      0.64
                                         
 Argentina MerVal              39819.67     0.807
                                         
 Colombia COLCAP                1127.36      0.75
                                         
                                                 
        Currencies             Latest    Daily %
                                          change
 Brazil real                     5.3199      0.53
                                         
 Mexico peso                    22.3840      0.36
                                         
 Chile peso                       802.4     -0.11
                                         
 Colombia peso                  3644.53     -0.01
 Peru sol                        3.5387     -0.51
                                         
 Argentina peso (interbank)     70.6300     -0.07
                                         
 Argentina peso (parallel)          123      4.88
                                         
 

    
 (Reporting by Shreyashi Sanyal and Ambar Warrick in Bengaluru;
Editing by Alistair Bell and Daniel Wallis)
  

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Business

COVID recovery vs COVID reality

LONDON (Reuters) – World shares inched towards a four-month high on Friday and industrial bellwether metal copper was set for its longest weekly winning streak in nearly three years, as recovering global data kept nagging coronavirus nerves at bay.

The market rally fuelled by record U.S. jobs numbers had largely blown itself amid a spike in U.S. COVID cases, though the fastest expansion in China’s services sector in over a decade and more stimulus ensured optimism remained.

Chinese shares had charged to their highest level in five years [.SS], helping the pan-Asian indexes to 4-month peaks, so the sight of European markets stalling early on took some traders by surprise.

Currency and commodity markets also had a subdued feel after an otherwise strong week for confidence-sensitive stalwarts such oil, copper </MCU3=LX>, sterling and the Australian dollar, which all struggled on Friday.

“I think infection rates and fears of localised lockdowns have doused some of the enthusiasm,” said Societe Generale strategist Kit Jukes.

“We have three elements now; vaccine hopes, decent data in most places but also the return of infection rates which can make you nervous.”

Against a basket of currencies, the dollar rose slightly in early London trading. It was up less than 0.1% at 97.306 and still firmly on track for its biggest weekly fall since the first week of June.

The euro was down at $1.1226 and though it gained against the safe Swiss franc it fell versus the sometimes commodity-driven Norwegian crown.

S&P 500 futures were down 0.2% but volumes were lower than usual due to a U.S. markets holiday on Friday for Independence Day.

U.S. nonfarm payrolls surged by 4.8 million jobs in June, above the average forecast of 3 million jobs in June, thanks to rises in the hard-hit hospitality sectors.

But economists noted there were caveats to the upbeat headline figures.

The number of permanent job losers continued to rise, increasing by 588,000 to 2.9 million in June while the unemployment rate remains a chunky 7.6 percentage points above its February level. A Deutsche Bank analysis put the U.S. unemployment rate behind all its developed market peers barring Canada.

The recovery also faces more headwinds as a surge of new coronavirus infections prompts U.S. states to delay and in some cases reverse plans to let stores reopen and activities resume.

More than three dozen U.S. states saw increases in COVID-19 cases, with cases in Florida spiking above 10,000.

Nevertheless markets are largely overlooking the spikes, taking the view that overall the situation was still improving overall.

Ten-year German government bond yields are up 5 basis points this week and set for their biggest weekly rise in a month, though they nudged down on Friday to -0.44%. Riskier Italian yields fell to 1.26% as well though, which is their lowest since late March. [GVD/EUR]

Oil prices also eased after an otherwise solid week. Brent crude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25 this time two months ago.

Copper prices were poised for a seventh consecutive weekly gain, their longest winning streak in nearly three years, despite a slight easing on the day after top supplier Chile had assured traders about supply.

Three-month LME copper was hovering at $6,040 a tonne, more than $1,500 up from lows it ploughed to in March. [/MET/L]

“The one issue that hangs over all the markets is will we see a surge in secondary infections that will trigger a second wave of national rather than regional shutdowns?” Malcolm Freeman, director of Kingdom Futures, wrote in a note.

(GRAPHIC: China recovery – here)

(GRAPHIC: COVID-19 in U.S. – here)

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Business

Asian stocks set to follow U.S. jobs rally, China in focus

NEW YORK (Reuters) – Asian stocks were likely to track a firmer Wall Street session on Friday after strong U.S. jobs data although growing Sino-U.S. tensions and a worrying surge in coronavirus cases is likely to cap gains.

Japan’s Nikkei 225 futures rose 0.45% and Australia’s S&P/ASX 200 futures climbed 0.58%.

E-mini futures for the S&P 500 rose 0.14%.

“While June data reflected a big improvement in the U.S. labor market, the recent sharp acceleration in new virus cases plus the prospect of an end to unemployment benefits by the end of July are two big layers of uncertainty,” said NAB Markets analyst Rodrigo Catril, adding that the uptick in U.S. cases could mean extended headwinds for the labor market.

Wall Street ended Thursday higher following a record increase in payrolls and a decline in unemployment. U.S. markets are closed on Friday in observance of Independence Day.

However, investor focus is shifting to worsening strains between China and the United States.

More than 75 U.S. members of congress sent a letter to the President Donald Trump urging him to take make a formal determination on whether China’s treatment of Muslim Uighurs and other groups constitutes an atrocity.

The U.S. State Department also warned American companies including Amazon.com Inc, Walmart Inc and Apple Inc to check their supply chains and ensure they are not doing business with entities linked to alleged human rights abuses against Uighurs in China’s Xinjiang province.

Separately, Congress passed legislation seeking to punish banks that do business with Chinese officials who implement Beijing’s draconian new national security law on Hong Kong.

MSCI’s gauge of stocks across the globe gained 0.92%. The Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 0.45% and the Nasdaq Composite added 0.52%.

The positive economic data also pushed oil prices higher.

Brent crude futures settled at $43.14 a barrel, rising $1.11, or 2.6%. U.S. West Texas Intermediate (WTI) crude futures settled at $40.65 a barrel, up 83 cents, or 2.1%.

Investors still embraced the safe-haven dollar and gold, which usually rise when risk appetite declines, as an acceleration in new COVID-19 cases across the country prompted fresh restrictions.

The dollar index rose 0.058%, with the euro up 0.01% to $1.1239.

The Japanese yen weakened 0.02% versus the greenback at 107.53 per dollar, while sterling last traded at $1.2468, up 0.02% on the day.

Spot gold rose 0.4% to $1,777.04 per ounce

U.S. Treasury yields ended the day lower ahead of the July 4 long weekend, with the benchmark 10-year yield fell 1.1 basis points at 0.6709%.

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Business

Asian stocks near 4-month highs on vaccine hopes, eyes on U.S. payrolls

SYDNEY/NEW YORK (Reuters) – Asian stocks hovered near four-month highs on Thursday on hopes of a vaccine for COVID-19 while copper prices jumped to a more than six-month peak on a better global outlook and supply fears in top producer Chile.

All eyes are on U.S. employment data, due later in the day, which are expected offer further cues into how the world’s largest economy is coping with a rise in coronavirus cases in several states.

In a sign the positive sentiment will extend elsewhere, E-minis for S&P500 rose 0.3% while futures for Euro Stoxx 50 rose 0.8% and those for Germany’s DAX climbed 0.8%. London’s FTSE futures added 0.6%.

Risk sentiment was whetted by a COVID-19 vaccine from Pfizer and Germany’s BioNTech, which was found to be well tolerated in early-stage human trials.[.N]

A vaccine for COVID-19, which has killed more than half a million people globally and shut down the world economy, has been long anticipated.

“Based on a vaccine trial containing 45 people, including placebos, the V-shaped recovery gnomes, are once again, reaching for the sky,” said Jeffrey Halley, Senior Market Analyst, Asia Pacific at OANDA.

MSCI’s broadest index of Asia Pacific shares outside of Japan rose 1.5% to near levels seen in early March.

All major Asian indexes were upbeat with Japan’s Nikkei rising 0.1%, China’s blue-chip index adding 1.7% while Hong Kong’s Hang Seng index climbed 1.8%.

U.S. employment figures will help indicate whether the world’s largest economy can sustain its fragile recovery as new COVID-19 cases accelerate in several southern states.

Economists polled by Reuters expect private employers to show 2.9 new million new jobs June, which would follow a surprise increase in May. Casting some doubt over that projection, however, was a smaller-than-expected increase in jobs seen in the ADP report on Wednesday.

“A better-than-expected outcome could go some way to settling the near-term debate that the U.S. labor market will heal relatively quickly and justify new highs in U.S. equities,” said Stephen Innes, strategist at AxiCorp.

Wall Street ended Wednesday higher after key economic indicators showed a rebound in Chinese manufacturing activity as it recovers from the pandemic while sharp declines in European factory activity eased.

Equity investors shrugged off concerns about Hong Kong where police arrested more than 300 people protesting sweeping new laws introduced by China to snuff out dissent.

Those developments have raised concerns about China’s already strained relations with its major western trading partners, particularly the United States.

In commodities, the most-traded August copper contract on the Shanghai Futures Exchange touched 49,570 yuan ($7,016.28) a tonne, its highest since Dec. 30, 2019.

Manufacturing activity rebounded in the United States in June, while the factory sector in Germany, Europe’s largest economy, contracted at a slower pace and top copper consumer China posted better-than-expected manufacturing data.

Meanwhile in Chile, where the number of COVID-19 cases have been climbing, miner BHP said it would begin to slow production at its small Cerro Colorado copper mine in the country.

Elsewhere, oil prices climbed and gold eased while the dollar was steady as encouraging macro data prompted investors to take on more risk.[O/R][GOL/]

Brent crude climbed 17 cents to $42.20 a barrel. U.S. crude rose 14 cents to $39.96 a barrel. U.S. gold futures were 0.21% lower, at $1,776.20.

The safe haven greenback was unchanged against the Japanese yen at 107.45. The euro was a shade higher at $1.1267 while sterling was slightly firmer at $1.2497.

The risk sensitive Australian and New Zealand dollar were 0.2% and 0.4% stronger respectively.

That left the dollar index at 97.044.

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Asian stocks rise on vaccine hopes, eyes on U.S. payrolls

SYDNEY/NEW YORK (Reuters) – Asian stocks tracked Wall Street higher on Thursday although sentiment was cautious ahead of U.S. employment data while copper prices jumped to more than six-month highs on a better global outlook and supply fears in top producer Chile.

MSCI’s broadest index of Asia Pacific shares outside of Japan rose 0.9% with all major indexes trading higher on hopes of a vaccine for COVID-19, which has killed more than half a million people globally and shut down the world economy.

Japan’s Nikkei rose 0.4%, China’s blue-chip index added 0.6% while Hong Kong’s Hang Seng index climbed 1.7%.

E-mini futures for the S&P 500 were flat.

U.S. employment figures due later in the day are expected to show if the world’s largest economy can sustain its fragile recovery as new COVID-19 cases accelerate in several southern states.

Economists polled by Reuters expect private employers to show 2.9 new million new jobs June, which would follow a surprise increase in May. Casting some doubt over that projection, however, was a smaller-than-expected increase in jobs seen in the ADP report on Wednesday.

“A better-than-expected outcome could go some way to settling the near-term debate that the U.S. labor market will heal relatively quickly and justify new highs in U.S. equities,” said Stephen Innes, strategist at AxiCorp.

Wall Street ended Wednesday higher after key economic indicators showed a rebound in Chinese manufacturing activity as it recovers from the pandemic while sharp declines in European factory activity eased.

Risk sentiment was whetted by a COVID-19 vaccine from Pfizer and Germany’s BioNTech, which was found to be well tolerated in early-stage human trials.[.N]

Equity investors shrugged off concerns about Hong Kong where police arrested more than 300 people protesting sweeping new laws introduced by China to snuff out dissent.

Those developments have raised concerns about China’s already strained relations with its major western trading partners, particularly the United States.

The U.S. House of Representatives passed legislation on Wednesday that would penalize banks doing business with Chinese officials who implement a national security law.

In commodities, the most-traded August copper contract on the Shanghai Futures Exchange touched 49,570 yuan ($7,016.28) a tonne, its highest since Dec. 30, 2019.

Manufacturing activity rebounded in the United States in June, while the factory sector in Germany, Europe’s largest economy, contracted at a slower pace and top copper consumer China posted better-than-expected manufacturing data.

Meanwhile in Chile, where the number of COVID-19 cases have been climbing, miner BHP said it would begin to slow production at its small Cerro Colorado copper mine in the country.

Elsewhere, oil prices eased and gold was a tad softer too while the dollar was steady in a sign of investor caution despite encouraging macro data.[O/R][GOL/]

Brent crude slipped 6 cents to $41.97 a barrel. U.S. crude was off 12 cents at $39.70 a barrel. U.S. gold futures was 0.12% lower, at $1,777.70.

The safehaven greenback was unchanged against the Japanese yen at 107.45. The euro barely moved too and was last at $1.1254 while sterling was treading water at $1.2477.

That left the dollar index at 97.139.

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Asian stocks set to track U.S. gains but Hong Kong jitters weigh

NEW YORK (Reuters) – Asian stocks were set to track Wall Street gains on Thursday as investors cheered signs the global economy was emerging from its coronavirus hibernation although trade is likely to be choppy as fresh concerns about Hong Kong keep investors cautious.

Also adding to market apprehension is June U.S. employment data due later in the day, which will show if the world’s largest economy can sustain its fragile recovery as new COVID-19 cases accelerate in several southern states.

E-mini futures for the S&P 500 edged 0.06% higher, while Australian S&P/ASX 200 futures climbed 0.71% and Japan’s Nikkei 225 futures rose 0.4%.

Economists polled by Reuters expect private employers to show 2.9 new million new jobs June, which would follow a surprise increase in May. Casting some doubt over that projection, however, was a smaller-than-expected increase in jobs seen in the ADP report on Wednesday.

“The weaker than expected ADP report suggests some downside risk to consensus,” said Joseph Capurso, head of international economics at Commonwealth Bank of Australia.

Wall Street shrugged off the miss and ended Wednesday trading higher after key economic indicators showed a rebound in Chinese manufacturing activity as it recovers from the pandemic and sharp declines in European factory activity eased.

In Hong Kong, Hang Seng index futures lost 0.42%. Markets in the Asian financial hub were closed on Wednesday, the same day police in the city arrested more than 300 people protesting sweeping new laws introduced by China to snuff out dissent.

Those developments have raised concerns about China’s already strained relations with its major western trading partners, particularly the United States.

The U.S. House of Representatives passed legislation on Wednesday that would penalize banks doing business with Chinese officials who implement a national security law.

On Wall Street, however, the focus was on positive data. The MSCI’s gauge of stocks across the globe gained 0.45% and the S&P 500 rose 0.50%.

The increase in manufacturing activity also propelled oil prices higher in anticipation of increased demand while gold and the dollar fell as the encouraging reports caused investors to take on more risk.

Brent crude rose 76 cents, or 1.8%, to settle at $42.03 a barrel. U.S. crude rose 55 cents, or 1.4%, to settle at $39.82 a barrel.

The improved sentiment weighed on the safehaven greenback with the dollar index down 0.265% and the euro up 0.03% to $1.1253.

The Japanese yen strengthened 0.05% to 107.42 per dollar, while sterling was last trading at $1.2477, up 0.06% on the day.

U.S. gold futures settled 1.1% lower, at $1,779.90.

U.S. Treasuries were weighed by the positive economic data and Federal Reserve meeting minutes, which signaled yield curve control was not coming anytime soon.

The benchmark 10-year yield was last up 2.9 basis points at 0.6824% on Wednesday.

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Business

Asian stocks set to track U.S. gains but Hong Kong jitters weigh

NEW YORK (Reuters) – Asian stocks were set to track Wall Street gains on Thursday as investors cheered signs the global economy was emerging from its coronavirus hibernation although trade is likely to be choppy as fresh concerns about Hong Kong keep investors cautious.

Also adding to market apprehension is June U.S. employment data due later in the day, which will show if the world’s largest economy can sustain its fragile recovery as new COVID-19 cases accelerate in several southern states.

E-mini futures for the S&P 500 edged 0.06% higher, while Australian S&P/ASX 200 futures climbed 0.71% and Japan’s Nikkei 225 futures rose 0.4%.

Economists polled by Reuters expect private employers to show 2.9 new million new jobs June, which would follow a surprise increase in May. Casting some doubt over that projection, however, was a smaller-than-expected increase in jobs seen in the ADP report on Wednesday.

“The weaker than expected ADP report suggests some downside risk to consensus,” said Joseph Capurso, head of international economics at Commonwealth Bank of Australia.

Wall Street shrugged off the miss and ended Wednesday trading higher after key economic indicators showed a rebound in Chinese manufacturing activity as it recovers from the pandemic and sharp declines in European factory activity eased.

In Hong Kong, Hang Seng index futures lost 0.42%. Markets in the Asian financial hub were closed on Wednesday, the same day police in the city arrested more than 300 people protesting sweeping new laws introduced by China to snuff out dissent.

Those developments have raised concerns about China’s already strained relations with its major western trading partners, particularly the United States.

The U.S. House of Representatives passed legislation on Wednesday that would penalize banks doing business with Chinese officials who implement a national security law.

On Wall Street, however, the focus was on positive data. The MSCI’s gauge of stocks across the globe gained 0.45% and the S&P 500 rose 0.50%.

The increase in manufacturing activity also propelled oil prices higher in anticipation of increased demand while gold and the dollar fell as the encouraging reports caused investors to take on more risk.

Brent crude rose 76 cents, or 1.8%, to settle at $42.03 a barrel. U.S. crude rose 55 cents, or 1.4%, to settle at $39.82 a barrel.

The improved sentiment weighed on the safehaven greenback with the dollar index down 0.265% and the euro up 0.03% to $1.1253.

The Japanese yen strengthened 0.05% to 107.42 per dollar, while sterling was last trading at $1.2477, up 0.06% on the day.

U.S. gold futures settled 1.1% lower, at $1,779.90.

U.S. Treasuries were weighed by the positive economic data and Federal Reserve meeting minutes, which signaled yield curve control was not coming anytime soon.

The benchmark 10-year yield was last up 2.9 basis points at 0.6824% on Wednesday.

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Economy

EMERGING MARKETS-Latam risk assets propped up by vaccine, economic recovery hopes

    By Ambar Warrick
    July 1 (Reuters) - Brazil's real shot higher on Wednesday,
with broader Latin American currencies in tow after data showed
manufacturing in the region's largest economy returned to growth
in June, while hopes for a potential coronavirus vaccine also
helped.
    The real added about 1.7%, starting the second half
of the year on a positive note after underperforming most
regional currencies in the second quarter of 2020.
    Brazilian manufacturing expanded in June for the first time
in four months, a survey of purchasing managers' activity
showed, coming back to life after three months in a state of
near paralysis due to the coronavirus pandemic.
    The reading, coupled with a COVID-19 vaccine developed by
German biotech firm BioNTech and U.S. pharmaceutical
giant Pfizer showing some potential in early-stage human
trials, helped brew some optimism over an economic recovery,
even as new infections in the region continued to grow rapidly. 
    News of the vaccine also spurred gains on Wall Street, which
in turn helped Latin American stocks.
    Brazilian stocks added 1.7%, while the Chilean
equity index rose about 0.9%. Both bourses had marked
strong gains in the second quarter as they came off drastic
losses due to the pandemic.
    Argentine stocks outperformed their emerging market
peers with a nearly 59% jump during the second quarter.
    
    Despite the strong gains, some economic readings continued
to paint a dire picture for Latin American economies. Chile's
economic activity hit another historic low in May as measures to
contain the spread of the coronavirus left many out of work and
businesses shuttered.
    The country's jobless rate also surged between March and
May, following a similar trend in Latin America as the virus
constrained economic activity.
    "The May report showed the deepest deterioration in labor
market conditions so far, not only given the sharp rise in the
unemployment rate but also the significant decline in employment
numbers, with private sector jobs declining at a record
double-digit rate," Goldman Sachs analysts wrote in a note.
    "We expect labor conditions to deteriorate further in the
coming months given the recent extension of quarantine
measures."
    Colombia's peso strengthened despite an interest rate
cut by the central bank. The bank also announced further
liquidity measures to bolster the economy.

    Key Latin American stock indexes and currencies:
    
    Stock indexes             Latest    Daily % change
 MSCI Emerging Markets         1002.27             0.72
                                        
 MSCI LatAm                    1929.29             3.36
                                        
 Brazil Bovespa               96696.43             1.73
                                        
 Mexico IPC                   37766.19             0.13
                                        
 Chile IPSA                    3993.98             0.88
                                        
 Argentina MerVal                    -                -
                                        
 Colombia COLCAP               1121.49             0.87
                                        
                                                       
       Currencies             Latest    Daily % change
 Brazil real                    5.3474             1.71
                                        
 Mexico peso                   22.7073             1.24
                                        
 Chile peso                      817.9             0.55
                                        
 Colombia peso                 3720.58             0.75
 Peru sol                       3.5348             0.17
                                        
 Argentina peso                70.5100            -0.07
 (interbank)                            
                                        
 
     

    
 (Reporting by Ambar Warrick in Bengaluru; Editing by Dan
Grebler)
  

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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 Fran├žois 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]

UNWELCOME DEVELOPMENTS

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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EMERGING MARKETS-EMEA stocks, FX muted as rising virus cases cloud economic outlook

* Turkish stocks outpace EMEA peers in Q2

* South African rand set to snap three-day losing streak

* Russian markets to face pressure from U.S. sanctions threat

By Ambar Warrick

July 1 (Reuters) – Emerging markets in Europe, Middle East and Africa were subdued on Wednesday as investors weighed some improvement in economic data against a sustained increase in U.S. coronavirus cases.

MSCI’s index of developing world stocks rose about 0.3%, supported chiefly by Asian equities after data showed Chinese factory activity expanded at a faster-than-expected pace in June.

The index marked its best quarterly gain since 2009 in the second quarter, as improving economic indicators and the lifting of some coronavirus-related curbs boosted risk appetite.

Turkish stocks, while flat for the day, outpaced their EMEA peers in the second quarter with a 30% rise, as a dearth of confidence in the lira and sovereign debt saw investors pivoting to equities.

Still, regional risk assets saw a rocky start to the new quarter following a spike in U.S. coronavirus infections, which could result in renewed lockdown measures in the world’s largest economy.

“Stock markets have priced in most of the optimism surrounding the U.S. economy’s reopening and are in need of fresh catalysts to push higher once more,” Han Tan, market analyst at FXTM wrote in a note.

“Scepticism has begun creeping in and investors are now second guessing the amount of upside that remains in stocks over the near-term. The rise in COVID-19 cases in some U.S. states warrants a cautious outlook as they threaten to throw the economy off its course towards the post-pandemic era.”

South Africa’s rand rose about 0.4% against the dollar, after weakening for three consecutive sessions. Data on Tuesday showed the country’s recession deepened in the first quarter of 2020, even before the impact of the coronavirus pandemic.

Stocks in the country were muted for the day.

Central European currencies such as the Hungarian forint and the Polish zloty inched higher against the euro.

Russian markets were closed for a holiday. Risk assets in Russia are expected to come under pressure from calls for U.S. sanctions against the country, if a reported Russian effort to pay the Taliban to kill U.S. soldiers in Afghanistan is confirmed.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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