GLOBAL MARKETS-Bargain hunting lifts European shares; COVID-19 keeps dollar in demand

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By Elizabeth Howcroft
LONDON, Sept 28 (Reuters) - European shares opened higher on
Monday after strong economic data from China helped lift
sentiment in the Asian session, but the dollar was in demand
with investors cautious over the second wave of COVID-19 and
upcoming U.S. elections.
Equities fell sharply last week and the dollar surged to
two-month highs as a resurgence of coronavirus infections in
Europe and caution ahead of the U.S. presidential elections in
November caused investors to re-evaluate their expectations for
a global economic recovery.
But on Monday, shares were firmly in the black, with the
Stoxx 600 up 1.6% .STOXX , London's FTSE 100 up 1.5% .FTSE
and Germany's DAX up 2.2% .GDAXI at 0724 GMT. After a tech-driven rally in Wall Street late on Friday,
Asian shares gained, with Chinese shares boosted by data over
the weekend showing China's industrial firms grew for the fourth
consecutive month in August. In Australia, lockdown restrictions in Victoria started to
be unwound as daily new coronavirus infections fell to single
digits for the first time in more than three months.
The MSCI world equity index .MIWD00000PUS , which tracks
shares in 49 countries, was up 0.5% at 0729 GMT, while
MSCI's main European Index .MSER was up 1.8%.
David Madden, market analyst at CMC Markets UK, said that
investors were bargain hunting after key share indexes hit
multi-month lows last week.
"The fears of a second wave are still persistent but we're
kind of in a lull at the moment," he said.
"We've already had the fear which drove stocks down then
that news has sunk in – people haven't forgotten about it but
for the time being it's less important.”
The STOXX 600's banking stock index was up 4.2%, after
hitting a fresh all-time low on Friday .SX7P .
Currency markets indicated increased risk appetite, as the
riskier Australian dollar AUD=D3 , New Zealand dollar NZD=D3 ,
Swedish crown SEK=D3 and Norwegian crown NOK=D3 were all up
against the U.S. dollar, recovering slightly from last week's
lows.
But the dollar was still in demand, with the dollar index
=USD holding near 2-month highs at 94.529 at 0748 GMT.
The benchmark 10-year German Bund yield was steady at -0.52%
DE10YT=RR .
Investors remain broadly cautious in light of rising new
COVID-19 infections in Europe, which pose the risk of further
restrictions on activity. The World Health Organization said on Friday that it is
worried about rising infections and hospitalisations ahead of
the Northern Hemisphere's flu season. Oil prices fell as the increasing virus cases damaged hopes
for a smooth recovery in fuel demand, with Brent on track for
its first monthly fall in six months. Gold prices slipped, with spot gold XAU= down 0.2% at
$1,856.64 per ounce by 0803 GMT.
"Rather than marking the start of a further decline, we
think gold's fall is a temporary correction," UBS wrote in a
note to clients.
"We think investors should use the drop in gold prices to
add exposure to it. By year-end 2020, we see the precious metal
again reaching the USD 2,000/oz mark," the note said.
Investors are turning more cautious ahead of the Nov. 3 U.S.
elections. The first debate between presidential candidates on
Tuesday.
President Donald Trump paid just $750 in federal income
taxes in both 2016 and 2017, the New York Times reported on
Sunday, citing tax-return data. Trump dismissed the report as
"fake news". Global manufacturing PMIs on Thursday and U.S. jobs data on
Friday will also be in focus this week. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
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