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Recovery hope fires fresh rally in equities but concerns remain
HONG KONG, June 3, 2020 (BSS/AFP) – Growing optimism about the global
economic recovery pushed Asian markets higher for a third day on Wednesday as
investors took heart from a further easing of lockdowns and looked past China-
US tensions and civil unrest across America.
The upbeat mood, and hopes for an extension to a massive output cut
agreement, helped oil markets continue their rally, with Brent breaking the
$40 mark for the first time in three months.
While deaths and infections surge in Latin America, governments in Europe
and Asia have become confident enough to lift containment measures that have
likely sunk the world economy into recession and destroyed tens of millions of
jobs.
Cafes, bars, pools, beaches and schools are cautiously reopening, fanning
hopes the second half of the year will see a sharp economic rebound, which —
combined with trillions of dollars in stimulus and central bank support —
have fed an equity rally.
“If I look at the markets, I see a V-shaped recovery,” Mark Mobius, co-
founder of Mobius Capital Partners, told Bloomberg TV. “That’s what the
markets are telling us.”
In early trade, Hong Kong, Tokyo and Sydney were up at least one percent,
while Singapore was more than two percent higher.
Seoul soared more than two percent as South Korea’s government unveiled a
supplementary budget worth $29 billion, while there were also big gains in
Wellington, Taipei, Jakarta and Manila.
The gains tracked a rally across European markets and Wall Street, where
dealers for now are looking past anti-racism protests in major US cities that
have led Donald Trump to call for the military to be deployed.
– More fuel for oil rally –
“For now the good virus news… (is) more than outweighing the bad news,”
said National Australia Bank.
However, it warned that there remained a lot of risk that could spark a
massive sell-off.
“On this score is worth noting that southern US states are still showing a
steady increase in infections, Hong Kong extended virus-prevention measures
after a new cluster of cases and Tokyo’s infections have also spiked,” the
commentary said.
“If these trends continue we could see the re-introduction of more severe
restrictions.”
The head of the World Bank David Malpass was also concerned about the
outlook, saying estimates that anti-virus measures would wipe out $5 trillion
are likely to fall far short of the actual damage.
Oil prices added to gains on hopes that major producers will meet to extend
their output cuts by one month to August, while investors were also cheered by
signs of a further drop in US stockpiles indicating demand is improving.
“The most bullish outcome for oil from the meeting is no sign of squabbling
between Russia and Saudi Arabia,” whose price war earlier this year helped
send prices crashing.
“Headlines suggest they are on the same page on supply, and that’s bullish
for oil in the context of an improving demand backdrop.”
The long-running advance in crude is also providing support to energy-
linked currencies, with the Australian dollar up more than one percent, while
other higher-yielding, riskier units were also enjoying buying. South Korea’s
won and the New Zealand dollar were all well up.
– Key figures around 0230 GMT –
Tokyo – Nikkei 225: UP 1.2 percent at 22,581.74 (break)
Hong Kong – Hang Seng: UP 1.1 percent at 24,269.48
Shanghai – Composite: UP 0.5 percent at 2,934.89
West Texas Intermediate: UP 2.7 percent at $37.80 per barrel
Brent North Sea crude: UP 2.0 percent at $40.36 per barrel
Euro/dollar: UP at $1.1189 from $1.1166 at 2040 GMT
Dollar/yen: DOWN at 108.49 yen from 108.69 yen
Pound/dollar: UP at $1.2588 from $1.2550
Euro/pound: DOWN at 88.75 pence from 88.96 pence
New York – Dow: UP 1.1 percent at 25,742.65 (close)
London – FTSE 100: UP 0.9 percent at 6,220.14 (close)
BSS/AFP/MMA/0940HRS