The shares of Asia supported by the reopening of the economies; oil, gold jump

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SYDNEY / HONG KONG (Reuters) – Asian stocks rose on Monday and oil prices hit a five-week high as countries’ efforts to reopen their economies raised hopes that the world was on the verge of breaking out recession.

FILE PHOTO: Pedestrians wearing face masks walk near a viaduct with an electronic map showing information about stocks, following an epidemic of coronavirus disease (COVID-19), in the financial district of Lujiazui in Shanghai, China, March 17, 2020. REUTERS / Aly Song / File photo

Hot weather drives much of the world out of coronavirus blockades as outbreaks of the epidemic from New York to Italy and Spain gradually lift restrictions that have kept millions of people locked up for months .

Positive sentiment overcame escalating US-China tensions, sending E-Mini futures for the S&P 500 up 1.1%, even though the results of a string of American retailers are likely to make the difficult reading.

EUROSTOXX 50 STXEc1 futures contracts were up 1.8% and FTSE FFIc1 futures contracts were up 1.5%.

Some analysts have warned against over-reading the rapid reopening of economies.

“The economies of Europe and the United States likely bottomed out in April and are slowly starting to come back to life,” Barclays economist Christian Keller wrote in a note.

“However, incoming data from most economies highlights the depth of the contraction, which increases the risk of longer-term scarring that could jeopardize the recovery.” “

Data in Japan confirmed that the world’s third largest economy had entered recession in the first quarter, putting it on the right track for its worst post-war slump when the coronavirus was doing great damage.

However, Tokyo’s Nikkei .N225 rose 0.6% as signs of a slowdown in coronavirus infections raised optimism that Japan would soon loosen restrictions in more prefectures. Chinese blue chips also rose 0.6%.

The largest MSCI index of Asia Pacific stocks outside Japan, which rose slightly for most of the day, was the last in a fraction.

Federal Reserve Chairman Jerome Powell acted cautiously in an interview over the weekend, saying that an economic recovery in the United States could extend deeply next year and that a full return may depend on a coronavirus vaccine.

Powell said on Sunday evening the likely need for an additional three to six months of government funding for businesses and families.

Data released on Friday showed that retail sales and industrial production plunged in April, putting the US economy on the path to its sharpest contraction since the Great Depression.

Trade tensions between the United States and China have added to the uncertainty, with Beijing warning that it is opposed to the latest rules against telecommunications equipment maker Huawei.

US lawmakers and authorities are developing proposals to push US companies to move their operations or major suppliers outside of China, including tax breaks, new rules and carefully structured subsidies.

DIVIDENDS DICTED

In a report on the dividend outlook for companies, Janus Henderson Investors argued that Europe and the United Kingdom would be more severely affected than North America, while technology, healthcare, food and most consumer staples should be safer.

His baseline scenario was a 15 percent drop in global dividends this year, worth $ 213 billion, and a 35 percent drop in the worst case.

This week, the US Treasury Department’s first auction for its 20-year bond will take place on Wednesday. The Treasury plans to borrow a record amount of nearly $ 3 trillion this quarter.

So far, the market has easily absorbed the flood of new debt, with 10-year yields staying within a narrow range around 0.64%.

The dollar has also been largely linked to its range, with its strong appeal keeping it broadly supported. Against a basket of currencies, it was last at 100.330, after drifting 0.7% last week.

The euro was stable at 1.0821 USD =, while the dollar was slightly stronger on the Japanese yen at 107.19 JPY =.

The pound briefly hit a seven-week low at USD 1.2073 = after the Bank of England chief economist said he was more urgently considering options such as negative interest rates and the purchase of riskier assets to support the economy.

In commodity markets, the flow of liquidity from central banks combined with record interest rates to help bring gold to a seven-year high. The metal last rose 1.3% to $ 1,763 an ounce, with silver and palladium also up.

Oil prices rose as demand rose as countries around the world eased travel restrictions, as US oil showed no signs of a price ditch last month before the WTI contract expired in June Tuesday.

Brent crude futures have firmed from $ 1.08 to $ 33.58 a barrel, while US crude has increased from $ 1.27 to $ 30.70.

Report by Wayne Cole and Sumeet Chatterjee; Editing by Richard Pullin & Shri Navaratnam

Our standards:Principles of the Thomson Reuters Trust.

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