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Global shares hit 3-month highs on economic recovery hopes

EconomyJun 03, 2020 04:40AM ET
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2/2 © Reuters. Investors look at screens showing stock information at a brokerage house in Shanghai 2/2

By Elizabeth Howcroft

LONDON (Reuters) - World shares hit three-month highs on Wednesday and the dollar fell for the sixth day running as easing lockdowns and hopes for more monetary stimulus gave investors confidence, despite civil unrest in the United States and rising COVID-19 tolls.

The MSCI (NYSE:MSCI) world equity index, which tracks shares in 49 countries, rose to its highest since March 6, having gained throughout the Asian session.

The index is down more than 7% year-to-date, amid pandemic lockdowns that have pushed many economies into contraction.

MSCI's main European Index also held near three-month highs and European bourses opened higher, with the STOXX 600 up over 1% and back to levels not seen since March 6.

In China, Japan and South Korea, where COVID-19 is relatively contained, stock indexes have recovered substantially to be only about 5-6% below this year's peaks.

There are some signs of recovery in business activity as governments restart their economies, albeit in the knowledge that easing lockdowns too early could trigger a second wave of COVID-19.

A closely-watched survey of service sector activity in China recovered to pre-epidemic levels in May.

Broader economic optimism supported risk-sensitive currencies and pushed down the dollar, which hit a three-month low against a basket of comparable currencies at around 0730 GMT.

"In a scenario where there's no meaningful recurrence of the virus, and progress is made on treatments and vaccines, we expect the U.S. dollar's weakness to continue," said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Oil rose on Wednesday, with Brent above $40 for the first time since March, as optimism mounted that major producers will extend output cuts and a recovery from the pandemic will spur demand for fuel.

Brent crude futures for August were up around 1.8% at $40.27 a barrel, by 0730 GMT. U.S. West Texas Intermediate (WTI) crude futures gained $0.92, or 2.5%, to $37.73 a barrel, the highest since March 6.

Spot gold fell 0.5% to around $1,717 per ounce.

STEEPENING U.S. YIELD CURVE

Germany's ten-year government bond yield rose to its highest since mid-April as the global risk-on mood saw demand for safer debt decline, slipping back slightly to -0.386% by 0825 GMT.

The European Central Bank is expected to ramp up stimulative bond purchases when it meets on Thursday.

The euro, which rose above $1.12 for the first time in 11 weeks in early London trading, is on track for a seven-day winning streak against the dollar - its longest streak since December 2013.

The safe-haven Japanese yen hit a two-month low of 108.85 to the dollar before bouncing back to around 108.79 per dollar.

The U.S. Treasury yield curve steepened, partly reflecting the sale of more government debt to finance massive stimulus efforts.

The 30-year U.S. Treasuries yield rose to as high as 1.532%, its highest since mid-March, as expectations of central bank policy support kept shorter yields in check.

The yield gap between five- and 30-year Treasuries rose to 118 basis points, the highest since early 2017.

Tens of thousands of people defied U.S. curfews to take to the streets on Tuesday for an eighth night of protests over the death of a black man in police custody.

"The disconnect between what the average person sees happening in the world and what they see happening in the financial markets is getting wider and wider," Marshall Gittler, head of investment research at BDSwiss, wrote in a note to clients.

Global shares hit 3-month highs on economic recovery hopes
 

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Comments (10)
Jb Jeong
Jb Jeong Jun 03, 2020 5:45AM ET
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Endless hopes hhh
Leo Putra Wijaya
Leo Putra Wijaya Jun 03, 2020 5:27AM ET
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At one point, it will not matter whether it is the Fed who will give up first or like David9 said, China roar and collapse the entire market. I do believe that China has become a nation with enough capability to topple the market if it ever collapses but the main reason that global economy will collapse is that it simply must revert to its original valuation. And ironically, it is always the bull with its horns that will pop the balloon and the bears that have entered into hibernation will wake up with the sound of the pop and by the end of it, the bears will say "i told u so" like david9 used to say. I just hope the fed will print enough money to patch the balloon while continue raking money for the winter......and then....let IT POP
James Bond
James Bond Jun 03, 2020 5:05AM ET
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The first statement about the MSCI is incorrect.
Wen Lin
Wen Lin Jun 03, 2020 4:57AM ET
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Hopium Rocks and JPow Rules.
Chris Sundo
Chris Sundo Jun 03, 2020 1:08AM ET
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..hope.. I read the word 'hope' .. U sure? 'hope' sounds similar to 'hype'  __ Itn't HOPE closer to airy HYPE?
Randall Wagner
Randall Wagner Jun 03, 2020 12:28AM ET
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You've been in lockdown to long D9.
David David
David9 Jun 03, 2020 12:28AM ET
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Lol...why do you think that?
David David
David9 Jun 03, 2020 12:18AM ET
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Let me tell you guys something...a country long divided must unite, long unite must divide, this is the forces of nature. US right now is a country setting into the divided stage and Chis is now in a united stage. That is why Ray Dalio's work The Change World Order, showing China is the rising power and US in decline. Trump will be known as the president that awaken the Eastern Dragon.
Irvin Mermelstein
Irvin Mermelstein Jun 03, 2020 12:18AM ET
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This isn't a healthy market. In March 1929, the market experienced a serious correction because of liquidity problems. Investment bankers (like JP Morgan) propped up the market by large infusions of additiona liquidity. This worked. The Dow rallied hugely for the next six months, as investors thought the bull market was permanent. The Dow topped at 440 in late September, followed by the Great Crash of 1929. While there were rallies, from 1929 to 1932 the market continued to fall, hitting bottom in July 1932, 89% off the 440 top.Once the market stops pricing in all the happy talk by the federal government, it will fall. The Bear Market of 1929-1932 is the only precedent for market price action at 25% unemployment.
Wen Lin
Wen Lin Jun 03, 2020 12:18AM ET
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Irvin Mermelstein at this rate, JPow will just print $100T to buy off the stock markets🤣🤣🤣
data junkie
data junkie Jun 03, 2020 12:01AM ET
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news outlets are running out of reasons
John Patrick
John Patrick Jun 02, 2020 10:38PM ET
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'stimulus hopes, risk appetite'... they really do need to come up with some more cliches for this fabricated market
Kaveh Sun
Kaveh Sun Jun 02, 2020 10:38PM ET
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Fabricated stories.
Kaveh Sun
Kaveh Sun Jun 02, 2020 10:25PM ET
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It follows usa market.
 
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