Asian stocks hit 3-month highs, resilient to American riots

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SYDNEY (Reuters) – Asian stocks soared to three-month highs on Monday as progress in opening economies helped offset nervousness over riots in American cities and discomfort over Washington’s fight for the power with Beijing.

FILE PHOTO: A passerby wearing a protective mask, after a coronavirus epidemic, passes in front of an electronic board showing the graphs of the recent movements of Nikkei in Japan, on average outside a brokerage house in Tokyo, Japan , March 6, 2020. REUTERS / Issei Kato

He was also relieved that President Donald Trump had started to end the United States’ special treatment of Hong Kong to punish China, but left his trade deal intact.

“With specific and verifiable measures against China that seem weak, the markets can draw hollow consolation that the United States is closely following,” Mizuho analysts said in a note.

After a cautious start, Asian markets were led upward by China on signs of recovery in parts of the national economy. Hong Kong .HSI managed to climb 3.6%, while Chinese blue chips .CSI300 put 2.4%.

An official survey of Chinese companies found that activity in its factories grew at a slower pace in May but that the dynamics of services and construction had accelerated.

A private survey showed a return to growth in May, although exports remained depressed.

This helped push MSCI’s non-Japan Asia Pacific largest share index from 2.1% to its highest level since early March. Japanese Nikkei .N225 added 0.7% to also hit a three-month peak.

The E-Mini futures for the S&P 500 have stabilized after falling 1% at the start of the session. Futures on EUROSTOXX 50 firmed by 1.4% and futures on FTSE by 1.1%.

The resilience was notable as major American cities were cleaning streets strewn with broken glass and burning cars because curfews did not prevent clashes between militants and law enforcement.

The crisis was another setback for the economy, which had just emerged from a slowdown similar to the Great Depression. After bad spending and trade data on Friday, the Atlanta Federal Reserve estimated that economic output could fall 51% annualized in the second quarter.

The May jobs report due for release on Friday is expected to show that the unemployment rate jumped to 19.8%, smashing the April record high of 14.7%. Payroll is expected to drop 7.4 million, in addition to the 20.5 million jobs lost the previous month.

YEARS, NOT MONTHS

“Current unemployment figures go far beyond what has been known in any post-war recession,” Barclays economist Christian Keller wrote in a note.

“As some sectors may never return to the status quo before the pandemic, the workforce faces a major challenge in reassigning workers,” he added. “Such a process could be a matter of years rather than months or quarters and in the meantime would weigh on consumer demand. “

Bond investors suspect that economies will need massive amounts of central bank support long after they reopen, keeping yields very low even if governments borrow a lot more.

US 10-year note yields were trading regularly at 0.66%, after recovering to 0.74% last month when the market absorbed a tidal wave of new issues.

Falling US yields weighed on the dollar, but the global reserve currency also tends to take refuge status to limit losses.

On Monday morning, the dollar fell 0.2% on a basket of peers to 98.018, after hitting an 11-week low at 97.944 on Friday. It was also down on the yen at 107.52.

Much of the recent decline in the dollar is due to the euro, which has been largely boosted by plans for an EU stimulus package. The single currency was up to $ 1.1131, after increasing 1.8% last week.

The markets are awaiting a meeting of the European Central Bank on Thursday where it is expected to significantly increase its asset purchases from around 500 billion euros to 1.25 trillion.

In the commodity markets, gold added 0.9% to $ 1,1742 an ounce.

Oil prices first dropped due to concerns over US demand, but found support for reports that Russia had no objection to the next meeting of OPEC and its allies advanced to June 4 from the following week.

Brent crude futures fell 22 cents to $ 37.62 a barrel, while American crude fell 19 cents to $ 35.30.

Editing by Stephen Coates and Simon Cameron-Moore

Our standards:Principles of the Thomson Reuters Trust.

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