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Europe cheers super-sized stimulus plan, U.S.-China tensions simmer

EconomyMay 28, 2020 05:10AM ET
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2/2 © Reuters. A man wearing protective face mask walks in front of a stock quotation board outside a brokerage in Tokyo 2/2

By Marc Jones

LONDON (Reuters) - European shares rose for the fourth straight session on Thursday and the euro perched at a two-month high, as businesses returning to work and a 750 billion euro EU stimulus plan outweighed rising U.S.-China tensions.

Asian markets had been subdued overnight after U.S. Secretary of State Mike Pompeo had warned Hong Kong no longer warranted special treatment under U.S. law, but there was no stopping Europe.

Traders diving back into the markets after Wednesday's EU plan to prop up the bloc's coronavirus-hit economies pushed the region-wide STOXX 600 index up 1% to its highest since early March.

The euro enjoyed the view at $1.1016, having risen to a two-month high. It also held at the near three-month high it had hit versus the neighbouring Swiss franc the previous day, while the dollar was largely quiet.

Euro zone bond yields were relatively stable too, with Italian borrowing costs - a key European confidence indicator - holding near eight-week lows and safe-haven German Bunds seeing another small sell-off.

"With the release now of the European Commission’s plan for COVID recovery, we see there being room for further positivity in Eurozone risk assets, even while the global sentiment is buffeted by China-related tensions," Mizuho analysts told clients.

"This feeds directly into our expectations for European risk assets to outperform, which will be further helped by a likely expansion of ECB QE next week."

Overnight, MSCI (NYSE:MSCI)'s broadest index of Asia-Pacific shares outside Japan had ended flat, having been in positive territory earlier in the day.

Shares in Hong Kong skidded as much 1.75% before ending down a 0.7% as Chinese shares managed to close positive. [.SS]. Japan's Nikkei had jumped 2.3% though U.S. stock futures lost momentum in Europe to trade only 0.1% higher.

The biggest risk to equities now looks to be the Sino-U.S. relationship, which is likely to worsen after Pompeo had said on Wednesday that China's plan to impose new security laws in Hong Kong were "only the latest in a series of actions that fundamentally undermine" the city's autonomy.

"All eyes remain on the U.S.-China relationship," said Chris Weston, the head of research at Pepperstone, a currency broker. "This is a risk for markets... One questions if the equity markets are too complacent here."

A punitive U.S. response to China on the issue of Hong Kong could result in a tit-for-tat reaction from Beijing, further straining ties between the world's two biggest economies and hobbling global growth.

President Donald Trump has said he will announce a response to China's policies towards Hong Kong later this week.

Yields on 10-year U.S. Treasuries rose slightly to 0.6966%. Although they are up from an all-time low of 0.4980% struck in March, they are still a whopping 120 basis points below highs seen in January.

China's yuan meanwhile was near a record low of 7.1966 per dollar in international markets due to uncertainty over Hong Kong. In 'onshore' trade too, it was nearly at its weakest since the height of the U.S.-China trade war last September.

Commodity markets groaned. U.S. crude futures fell 3.2% to $31.76 a barrel, while Brent crude fell 1.73% to $34.14 per barrel as investors fretted about Trump's response to China.

Europe cheers super-sized stimulus plan, U.S.-China tensions simmer
 

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Comments (16)
Buzzy Jefferson
Buzzy Jefferson May 28, 2020 4:25AM ET
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Whaaaat? The rest of Asia isn't in love with Beijing's crushing of liberty in Hong Kong? How could that be?
Rafiq Baloch
Rafiq Baloch May 28, 2020 4:10AM ET
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what do you say gold is going to down or not
Rafiq Baloch
Rafiq Baloch May 28, 2020 4:10AM ET
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subscriptionGold to go to nearest liquidity void May 28, 20202020-05-28If we look at the 4-hour chart, we can see that the liquidity void bellow the current price for Gold is now at 1704.92-1695.86. It acts as a magnet area for Gold. This scneario has already been confirmed by the CCI (30) that broke through all the 3 level 100, 0, & -100. The CI (30) demonstrates that Gold is likely to decline. This dcenarios will come true if Gold does not break out and closes above the 1714.52 level.
Charles Kao
ckao May 28, 2020 2:59AM ET
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Could be another golden buying opportunity for HK stock and real estate, like 1997.
Willy andreas
Willy andreas May 28, 2020 1:37AM ET
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yeah they say everyday is a new hopes right?
Tom Holding
Tom Holding May 28, 2020 1:13AM ET
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I’m just glad my investments during this pandemic has made 50 percent interest
Show previous replies (3)
Ian Macklemore
Ian Macklemore May 28, 2020 1:13AM ET
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I guess its time to let an expert handle my investment decisions and assets while i learn as well . I lost so much doing that myself. Larry please how can i reach your agent also?
Ian Macklemore
Ian Macklemore May 28, 2020 1:13AM ET
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Username???
Simon Giovinco
Simon Giovinco May 28, 2020 1:13AM ET
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Wow same guy i consult with . Great and honest guy . Made 40% profit off my invested capital in less than a month.
Tom Holding
Tom Holding May 28, 2020 1:13AM ET
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Telegram
Tom Holding
Tom Holding May 28, 2020 1:13AM ET
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INVESTINGGENIUS
Brandon Son
Brandon Son May 27, 2020 11:28PM ET
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China and USA will go to war in 2022. They will not bend and neither will USA.
Charles Kao
ckao May 27, 2020 11:28PM ET
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Sorry, 2025 may be, may be not. 2022, no way.
Craig Jessup
Craig Jessup May 27, 2020 11:28PM ET
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They will wait to see who next nutless democrat they put in office and pounce. Biden wins it may be 2021.. Praying Trump gets reelected.
Brandon Son
Brandon Son May 27, 2020 11:24PM ET
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hopes n dreams. smoke n mirrors
Sam Crowther
Sam Crowther May 27, 2020 10:09PM ET
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Economies reopening...people realizing this was not the zombie apocalypse, a real plausibility that a vaccine will be created within the year which is 3 years faster thab any otger vaccine created. The stimulus implemented by the Fed was effective. Have you seen anything in history such as the Great Depression to show you people are resillient abd perserverant, ultimatley propelling the advancement of society...this type of thing only has 150 years of statistical data lol
Brandon Son
Brandon Son May 27, 2020 10:09PM ET
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many people will refuse to take it. then what?
rob finch
rob finch May 27, 2020 10:09PM ET
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I'm not taking it. I'm glad well have it as an option for groups with higher risk though. my parents might take it. especially if they have it in the flu shot.
Randall Wagner
Randall Wagner May 27, 2020 10:09PM ET
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You'r right it is not hope it's for real ..time to buy is now and make lots of money.
Randall Wagner
Randall Wagner May 27, 2020 10:04PM ET
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Without favorable treatment China will be begging for help from the USA as they fall on thier face They are # 2 because we made them # 2.
Kwong To
Kwong To May 27, 2020 10:04PM ET
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Go ahead and make China's day!
Sean Livingstone
Sean Livingstone May 27, 2020 10:04PM ET
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If Trump wants to give up on China, he would have left her alone. He wants the market, and so he is going through all this trouble... Stop being naive.
Buzzy Jefferson
Buzzy Jefferson May 27, 2020 10:04PM ET
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Sean Livingstone   - What market? China's isn't even 9% of our total exports? You chicoms keep popping off about how America needs your market, but the reality is that we never have and never will. Feeble!
Mike Chen
Mike Chen May 27, 2020 9:16PM ET
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China will do better without US
rob finch
rob finch May 27, 2020 9:16PM ET
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true without US in the way they can just drive tanks over those pesky protesters like they did in Tienamen square.
Sam Crowther
Sam Crowther May 27, 2020 9:16PM ET
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rob finch lol check mate
Kwong To
Kwong To May 27, 2020 9:16PM ET
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So be it.
Robert DZ the patterns
Robert DZ the patterns May 27, 2020 9:13PM ET
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Where are all those hopes coming from? And hopes of hopes too.
Sam Crowther
Sam Crowther May 27, 2020 9:13PM ET
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Economies reopening...people realizing this was not the zombie apocalypse, a real plausibility that a vaccine will be created within the year which is 3 years faster thab any otger vaccine created. The stimulus implemented by the Fed was effective. Have you seen anything in history such as the Great Depression to show you people are resillient abd perserverant, ultimatley propelling the advancement of society...this type of thing only has 150 years of statistical data lol
Sam Crowther
Sam Crowther May 27, 2020 9:12PM ET
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JD and Alibaba are gold here
Div Patel
Div Patel May 27, 2020 9:07PM ET
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will spot Gold price cross the 1750 mark any soon ??
Div Patel
Div Patel May 27, 2020 9:06PM ET
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will spot cross the 1750 mark any soon ??
 
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