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GLOBAL MARKETS-World shares rally to 4-week highs as investors bet on China revival

Published 07/06/2020, 04:25 PM
Updated 07/06/2020, 04:30 PM
© Reuters.
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* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Ritvik Carvalho
LONDON, July 6 (Reuters) - Global stock markets rallied to
four-week highs on Monday as investors counted on a revival in
Chinese activity to boost global growth, even as surging
coronavirus cases delayed business re-openings across the United
States.
MSCI's All-Country World Index .MIWD00000PUS , which tracks
shares across 49 countries, rose 0.7% to its highest since June
6 after the start of European trading.
European shares jumped, with the pan-European STOXX 600
index rising 1.64%. Stocks exposed to China, like carmakers
.SXAP , industrials .SXNP , energy firms .SXEP and luxury
goods makers rose strongly, while banks .SX7P also rallied.
.EU
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS climbed 1.6% to its highest since
February, with the bullish sentiment spilling into other
markets.
E-Mini futures for the S&P 500 ESc1 firmed 1.2%.
Chinese blue chips .CSI300 jumped 5.7% on top of a 7% gain
last week to their loftiest level in five years. Even Japan's
Nikkei .N225 , which has lagged with a soft domestic economy,
managed a rise of 1.8%.
Among the reasons investors cited for the buying was
improving economic data - UBS noted Citi's Economic Surprise
Index for the U.S. has risen to its highest level on record. The
index measures how well economic data releases are faring
relative to consensus forecasts.
Some cited an editorial in the China Securities Journal,
which said on Monday that China needed a bull market to help
fund its rapidly developing digital economy. "We advise against regarding uncertainty as a reason for
exiting markets. Instead, we see ways for investors to cope with
uncertainty - including averaging into markets - or even take
advantage of volatility," said Mark Haefele, chief investment
officer at UBS Global Wealth Management.
In Hong Kong, Jefferies chief global equity strategist Sean
Darby said the positive sentiment towards Asian markets was the
result of better than expected regional economic data and
elevated liquidity levels.
"All of the global monetary policy indicators are flashing
green right now. It is very loose and that should mean markets
which have underperformed should do well," Darby told Reuters.
"The dollar has also been weaker over the past five days so
emerging markets, led by China, normally do well on that back of
that."
Most markets gained ground last week as a raft of economic
data from June beat expectations, although the resurgence of
coronavirus cases in the United States is clouding the future.
In the first four days of July alone, 15 states have
reported record increases in new cases of COVID-19, which has
infected nearly 3 million Americans and killed about 130,000,
according to a Reuters tally. Analysts estimate that reopenings affecting 40% of the U.S.
population have now been wound back.
"Markets will have to climb a wall of worry in July as
economic activity likely softens from the V-shaped recovery seen
over recent months," said Robert Rennie, head of financial
market strategy at Westpac.
"We must remember too that U.S. and China relations are
deteriorating noticeably."
Two U.S. aircraft carriers conducted exercises in the
disputed South China Sea on Saturday, the U.S. Navy said, as
China also carried out military drills that have been criticised
by the Pentagon and neighbouring states. The risks, combined with unceasing stimulus from central
banks, have kept sovereign bonds supported in the face of better
economic data. While U.S. 10-year yields US10YT=RR edged up to
0.7% on Monday, well off the June top of 0.959%.
Germany's benchmark 10-year Bund yield edged up, pulling
further away from recent five-week lows in the face of rallying
equity markets. GVD/EUR
Analysts at Citi estimate global central banks are likely to
buy $6 trillion of financial assets over the next 12 months,
more than twice the previous peak.
Major currencies have been largely rangebound with the
dollar index down 0.3% at 96.894 =USD , having spent an entire
month in a snug band of 95.714 to 97.808.
The dollar was a shade firmer on the yen at 107.57 JPY= on
Monday, while the euro rose above the $1.13 mark EUR=EBS .
In commodity markets, gold has benefited from super-low
interest rates across the globe as negative real yields for many
bonds make the non-interest paying metal more attractive.
Spot gold traded at $1,776.21 per ounce XAU= , just off
last week's peak of $1,788.96. GOL/
Oil prices were mixed with Brent crude LCOc1 futures up
1.87% at $43.58 a barrel, while U.S. crude CLc1 gained 0.84%
to $40.99 amid worries the surge in U.S. coronavirus cases would
curb fuel demand. O/R

($1 = 7.0429 yuan)



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