SINGAPORE (Reuters) – Asian stocks gained on Tuesday as investors focused on the prospect of a global corona virus recovery against well-known concerns about US-China relations and the depth of economic damage.
FILE PHOTO: Passers-by who wear protective masks after a Coronavirus Disease (COVID-19) outbreak are displayed on a screen showing stock prices outside a broker in Tokyo, Japan on March 17, 2020. REUTERS / Issei Kato
However, US President Donald Trump’s vow to use violence to end violent protests in American cities hampered global risk appetite, leaving Wall Street stock futures in Asia negative.
MSCI’s broadest Asia Pacific non-Japan equity index, which had its best day in two months on Monday, continued its rally with no problems, rising 0.3%. The dollar caused heavy losses, but stabilized and bonds tightened.
The week started with higher risk currencies and global stocks rising after Trump’s response to China’s tightened influence on Hong Kong – with threats, not tariffs – lowered the temperature of tensions between China and the United States.
However, reports of an order from the Chinese government to stop buying soybeans raised the specter of harmful trade disputes between Washington and Beijing.
“There is increasing concern about further deterioration in China-US relations,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“In the meantime, we’re hanging in there … but I think we’ll be a little exhausted given the dizzying heights we’re trading at.”
Global equity markets have rallied nearly 36% since their lows in March, hoping for a rapid recovery from a pandemic that killed nearly 375,000 people and that global growth has been stifled as countries have closed to the Slow the spread of the virus.
Purchasing Managers’ Index (PMI) data for May indicated a fragile but encouraging recovery in global manufacturing – which hopes the worst is over.
Japan’s Nikkei rose 1% to its highest level since late February, and the Seoul, Taipei and Hong Kong markets also grew.
“This optimistic risk assessment can only remain if measures such as orders and employment continue to improve from month to month,” said Alan Ruskin, international chief strategist at Deutsche Bank.
“Early setbacks would be a very bad sign, but are not expected in the period immediately after the closings end.”
The currency and bond markets took a breather, and the safe haven dollar scratched multi-month lows against most major currencies and pushed bond yields down.
The Australian and New Zealand dollars fell 0.3% each after strong gains on Monday, and the dollar was a fraction above an 11-week low against a currency basket.
The yield on 10-year benchmark US government bonds fell 1 basis point to 0.6526%.
The wave of outrage in the United States after the death of George Floyd, who died in Minneapolis after being held under the knee of a white policeman for almost nine minutes, does not seem to affect the mood of global investors yet.
Even so, the riots have left dozens of US cities under curfew, racist tensions at the boiling point, and some analysts fear this will be another hurdle to the recovery in the economy or even trigger a second wave of coronavirus infections. US equity futures fell 0.5% in Asian trading.
Around 40 million Americans have lost jobs since mid-March, and many states have emerged from closures, even though daily new cases tend to slow down.
“It would not be long before (case numbers) rose again,” said Rob Carnell, ING research director in Asia, who said that the market’s nonchalance may not continue if, as Trump warned, troops are called to put down protests .
Oil futures stabilized and traders were waiting to see if major producers agreed to an extension of production cuts at an OPEC + meeting later this week. Brent futures rose 0.4% or 15 cents a barrel to $ 38.47 and US crude remained unchanged at $ 35.44 a barrel.
Spot gold was stable at $ 1,739.36 an ounce.
Reporting by Tom Westbrook in Singapore. Additional reporting by David Henry in New York; Edited by Sam Holmes