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Stocks rally to four-week highs as investors bet on China revival

Stock MarketsJul 06, 2020 07:50AM 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 Ritvik Carvalho

LONDON (Reuters) - Global stock markets rallied to four-week highs and China's yuan headed for its best day against the dollar since December on Monday as investors counted on a revival in China to boost global growth, even as surging coronavirus cases delayed business re-openings across the United States.

MSCI's All-Country World Index, which tracks shares across 49 countries, rose 0.7% to its highest since June 6, by midday in London.

European shares jumped, with the pan-European STOXX 600 index rising 1.4%. Stocks exposed to China -- carmakers, industrials, energy firms and luxury goods makers -- rose strongly, while banks also rallied.

In Asia, MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.8% to its highest since February, with the bullish sentiment spilling into other markets.

E-Mini futures for the S&P 500 gained 1.1%.

Chinese blue chips jumped 5.7% on top of a 7% gain last week to their highest in five years. Even Japan's Nikkei, which has lagged with a soft domestic economy, managed to rise 1.8%.

China's offshore yuan was on track for its best day against the dollar since December, up nearly 0.7% at 7.0210 per dollar.

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 (NYSE:JEF) 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 re-openings 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 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. U.S. 10-year yields edged up to 0.7% on Monday, well off the June top of 0.959%.

Italy's 10-year bond yield fell 4 basis points to around 1.29% -- pushing towards more than three-month lows hit last week. That squeezed the gap over benchmark German Bund yields to around 171 basis points.

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 range-bound with the dollar index down 0.3% at 96.894, having spent an entire month in a snug band of 95.714 to 97.808.

The dollar was flat against the yen at 107.50 on Monday. The euro rose 0.6% against the dollar, above the $1.13 mark.

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, just off last week's peak of $1,788.96.

Oil prices were mixed with Brent crude futures up 1.2% at $43.58 a barrel. U.S. crude was flat at $40.65 a barrel, amid worries the surge in U.S. coronavirus cases would curb fuel demand.

Stocks rally to four-week highs as investors bet on China revival
 

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Comments (25)
George Pichurov
George Pichurov Jul 07, 2020 6:09AM ET
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China revival? How, world was angry on them no?
Zachary Buszta
Zachary Buszta Jul 06, 2020 9:18AM ET
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it is summer and the stock markets tend to do very good in the hot months of the year.
Edward Chong
Edward Chong Jul 06, 2020 9:18AM ET
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haha that is a good one !
Warren Nugget
Warren Nugget Jul 06, 2020 9:11AM ET
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US and China should work together to deal with world problems.. not *****each other... what’s the goods? NONE
Jimmy Chang
Jimmy Chang Jul 06, 2020 9:11AM ET
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China has broken ever agreements that have signed with the western. Wake up and stop dreaming. China want to be on top, lets face it.
Ricardo Diogo
rcd72 Jul 06, 2020 8:52AM ET
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Yes Let us all celebrate the rise of Chinese products and the bankruptcy of free world industry!!
Bulls MakeMore
Bulls MakeMore Jul 06, 2020 8:47AM ET
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We know the virus/economy are much improved in NY, and I just heard an analyst on CNBC who covers a big chuck of the rest of the country tell us that restaurants are packed and the economy is doing great, and that we're in the kind of secular bull market that most of us have not been alive long enough to see, and that could last another 5-7 years; his price target for S&P500 is 4000 in a year.
MWAN WAN
MWAN WAN Jul 06, 2020 6:10AM ET
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clearly China govt purposely pumps up the market to show it is control after rushing HK NSL and slaps DT heavily
Dan White
Dan White Jul 06, 2020 5:08AM ET
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Optimism may be justified in China. I hope so. Our energy and tech sectors and even hospitality need a vibrant Asian economy. S&P futures are up on the news.
Vv Pp
Vv Pp Jul 06, 2020 4:41AM ET
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China is safe, USA is not. Trumpjoker should ask them for some advice on how to protect the people rather on help to win the elections
Muhamed Jaffir
Muhamed Jaffir Jul 06, 2020 4:41AM ET
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Maybe if the Chinese didn't infect the entire world fleeing Wuhan for western medical care, the world wouldn't need protection.
Vv Pp
Vv Pp Jul 06, 2020 4:41AM ET
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in civilized countries it's over, in 3rd world countries it will keep rising ❤️
Muhamed Jaffir
Muhamed Jaffir Jul 06, 2020 4:41AM ET
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Civilised countries, like China with its rich culture of cannibalism. You are disgusting and the furthest thing from civilised.
Vv Pp
Vv Pp Jul 06, 2020 4:41AM ET
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Muhamed Jaffir don't burn books there in your country dude, read them, learn some history
Muhamed Jaffir
Muhamed Jaffir Jul 06, 2020 4:41AM ET
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Mao burned plenty of books in the four "olds" campaign, because he was slow and petulant.
Nk bag holder
Nk bag holder Jul 06, 2020 4:36AM ET
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China are using strict rules to fight the Covid where as the America are too complacent when dealing with it. So both are not comparable.
perplexed76 .
perplexed76 . Jul 06, 2020 3:26AM ET
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China market didnt take part in any hope rally, it was flat for years.
James Hilton
James Hilton Jul 06, 2020 3:10AM ET
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Stonks
Spoiled Cash
Spoiled Cash Jul 06, 2020 3:10AM ET
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the best comment ive seen yet
Chris Sundo
Chris Sundo Jul 06, 2020 2:38AM ET
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'China blue chips scale 5-year peak' -- For celebrating the fooling of a foolish American prez. That's the only reason I can see for the China market being up. And since WS is undercover with China the USA market is cheering the same reason. Ah well, what goes up usually goes down, perhaps even as early as right after the opening, a so-called gap & ****
Chris Sundo
Chris Sundo Jul 06, 2020 2:38AM ET
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* * * * c r a p
Chris Sundo
Chris Sundo Jul 06, 2020 2:33AM ET
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the media are not telling us what's going on . misinformation and withholding of the real reason why the market is up
ravi holla
ravi holla Jul 06, 2020 2:33AM ET
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Media does not know what is going on and does not know the real reason, if the reporter does know the real reason, he would rather trade/invest.
Chris Sundo
Chris Sundo Jul 06, 2020 2:28AM ET
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First we have a stu pid American prez who can't think beyond the tip of his nose and lead Americans by wrong example, then we have a stu pid American public who could not listen and hear the examples of South Korea and they needed to listen to their incompetent leader, neither of which could follow orders by their medical experts, and neither of them could look at the leadership of South Korea who was the shining example of HOW TO DO IT WORLD! JUST PAY ATTENTION AND IMITATE, DON'T TRY TO RE-INVENT THE WHEEL, but now USA missed the boat and now Asia is ahead of the curve and America has egg on it's face. Totally avoidable.
F.M. Lakhani
F.M. Lakhani Jul 06, 2020 1:56AM ET
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Trump is trying to destroy China for election gain but quite opposite is hardly !
F.M. Lakhani
F.M. Lakhani Jul 06, 2020 1:56AM ET
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*happening
你你你 你你
你你你 你你 Jul 06, 2020 1:34AM ET
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you demonizing China by every means your little brain could come out?
Geoff McKay
Geoff McKay Jul 06, 2020 1:34AM ET
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🤣
你你你 你你
你你你 你你 Jul 06, 2020 1:33AM ET
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you demonizing China by every means your little brain could come out?
Jason Zou
Jason Zou Jul 06, 2020 1:33AM ET
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Long live Chicom, down Amcol.
Tom Car
Tom Car Jul 06, 2020 1:14AM ET
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Can they at least mention 221covid deaths today , it is the lower since March?
Real Bull
Real Bull Jul 06, 2020 12:33AM ET
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Maga the companing little b iiii ttt c hhhhhh
Loai Abushawar
Loai Abushawar Jul 06, 2020 12:23AM ET
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all is fake and they want us to believe that us doing tremendous job what a fake world and numbers
du ich
du ich Jul 06, 2020 12:23AM ET
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who cares you believe or not,
Jack Zhang
Jack_A Jul 05, 2020 11:58PM ET
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us up, fake hope. Asia up, fake number. what a fake world!!!
bingkeung lee
bingkeung lee Jul 05, 2020 11:37PM ET
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the liberal Democrats try like ********to destroy the US economy by spreading fake China virus numbers.
Musical Critic
Musical Critic Jul 05, 2020 11:16PM ET
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So the US Dow is happy to see China on 5-year peak? OR shoukd yhese numbers be believed at all?
eddie glass
eddie glass Jul 05, 2020 9:55PM ET
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reuters, mout.hp.iece of the chine.se com.m.unist party, has failed at spreading f.aake ne.ws of the "se.cond wa..ve". nobody cares, more testing, more asy.mp.tomatic cases, many countries not even testing anymore, de.a.th rate plum.meting. COVID-1984
eddie glass
eddie glass Jul 05, 2020 9:55PM ET
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sorry for the periods, this site heavily censors comments to please their globalist overlords
 
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