* China rally extends for eighth session, yuan soars
* Gold above $1,800/oz for first time since 2011
* Investors hope for positive outlook from U.S. earnings
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Marc Jones
LONDON, July 9 (Reuters) - European shares were rising again
after a two-day wobble on Thursday as China's markets continued
their charge, and something between fear and greed propelled
gold to a nine-year high.
Chinese stocks set their longest winning streak in two years
and the yuan had strengthened past 7 per dollar overnight .SS ,
despite rising tension over Hong Kong and the economic
uncertainty caused by COVID-19.
It was the Shenzhen blue-chip index's eighth straight day of
gains, adding another 1.5% to its 16% surge this month, and
pushed Europe in the right direction after some hesitation
caused by uninspiring German data. .EU Also improving risk sentiment was the dollar's downward
momentum – it was at a one-month low against the euro, a three-
week low versus the British pound and four-month lows against
the Swiss franc. /FRX
That was a green light for emerging markets too. MSCI's EM
currency index was at a one-month high. Trade- and commodity-
related currencies also reacted to China's gains. The New
Zealand dollar was at the highest since January and the Aussie
dollar at a one-month high.
"We've seen a more generalised view back to riskier assets.
The Chinese equity surge has been the poster child for risk-on
move across the last few sessions," said Jeremy Stretch, CIBC
Capital Markets' head of G10 FX strategy.
Asia's investors have been riding high after a front-page
editorial in Monday's China Securities Journal extolling market
fundamentals, which was taken as official encouragement to buy
stocks.
State-run media warned on Thursday that investors should
still pursue rational investments and manage risks, but that
didn't rein in the bulls.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS rose 0.8% and touched a 20-week high. The yuan
CNY= rose to a four-month high as it broke through the
7-per-dollar barrier. FRX/
"Broadly speaking, the Chinese economy is coping better not
only with a recovery but also in dealing with the potential of a
second wave (of infections)," said National Australia Bank FX
strategist Rodrigo Catril.
"Rightly or wrongly, that market is liking the idea that the
yuan can strengthen on the back of equity inflows."
Although China's factory-gate prices fell for a fifth
straight month in June, signs of a pickup suggest a slow but
steady recovery remains intact. Elsewhere, German export figures recovered less than
expected in May as demand remained subdued despite lockdowns
being lifted in large parts of Europe.
They jumped by 9% on the month after diving by 24% in April,
but economists had been hoping for a near 14% bounce and the
numbers remained almost 27% lower than their pre-crisis level in
February, the Federal Statistics office said. Deutsche Bank's chief international strategist, Alan Ruskin,
said the yuan enjoyed the "perfect combination" of tight
monetary policy, yield advantage and equity demand.
In any case, its rally ignored growing pressure from the
West over China's tightening grip on Hong Kong, surging U.S.
coronavirus cases and a fresh lockdown of 5 million Australians
in Melbourne.
Australia's benchmark ASX 200 index .AXJO rose 1% and
Japan's Nikkei .N225 rose 0.6%. The Australian dollar AUD=D3
rose 0.2% to $0.6995, but - perhaps indicating a cap on
exuberance - it was unable to break past resistance at $0.70.
U.S. Treasuries were not sold into the rally, either. Nor
were the safe havens of gold or the Japanese yen. The yield on
benchmark U.S. 10-year Treasuries US10YT=RR remained under
pressure at 0.6545% and gold XAU= at $1,810.73 an ounce.
EARNINGS AHEAD
The U.S. earnings season approaches with investor hopes high
for a stabilisation, but warning signals are flashing and
Federal Reserve officials raised fresh doubts on Wednesday about
the durability of the rebound. The United States has also posted its largest number of
daily new coronavirus cases since the outbreak began and global
tensions are on the rise. U.S. jobs data due at 1230 GMT will offer the next checkup
on the recovery's progress, followed by results next Tuesday
from J.P. Morgan JPM.N , Citigroup C.N and Wells Fargo
WFC.N , then Microsoft MSFT.O and Netflix NFLX.O on
Thursday.
"Earnings season is upon us, and we really want to see what
it looks like," said Jun Bei Liu, a portfolio manager at
Australia's Tribeca Investment Partners.
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