U.S. stocks rose on Monday as investors weighed halting steps toward a new coronavirus relief program and the country recorded its lowest number of new infections in weeks.
The S&P 500 rose 0.6% at the start of trading in New York. The index climbed 5.5% in July. The Dow Jones Industrial Average index added 130 points, or 0.5%, while the Nasdaq Composite Index rose 0.9%.
Trading volumes are expected to decline over the coming weeks with the onset of the summer holiday season, leading to increased volatility.
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Investors were encouraged by a smaller daily increase in the 19 cases of Covid in the United States, despite delays in an agreement on additional budget support for the US economy. The United States has reported more than 47,000 new cases of coronavirus, the smallest daily increase in nearly four weeks, after posting a record number of new infections in July.
“A few weeks ago, cases in the United States were increasing 40 to 50% on a weekly basis. They are falling now. Not as fast as they might seem, as the tests have dropped, but they are even lower, as is the hospitalization rate. Markets like that, ”said Ian Sheperdson, chief economist at Pantheon Macroeconomics.
Overseas, the pan-continental Stoxx Europe 600 index rose 1.7%, supported by survey data showing signs of recovery at factories in the eurozone.
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Democrats and Republicans disagreed during the weekend’s negotiations over a new economic relief plan, including help to replace the $ 600-a-week federal boost to unemployment benefits that expired on Friday. The White House had hoped to pass a short-term extension of federal unemployment insurance, but Democrats want to negotiate a full package of relief, including state and local aid.
“The slowness with which Washington reaches an agreement on fiscal policy shows a certain fatigue. A deal will likely come, but after some big fiscal cliffs are passed, ”said James McCormick, strategist at NatWest Markets.
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Comments by Secretary of State Mike Pompeo over the weekend that the White House may take action against Chinese software companies have fueled concerns over the deterioration of relations between the world’s two largest economies. Heightened tensions between Beijing and Washington have weighed on investor confidence for weeks, with growing expectations that the U.S. government will take a tougher line in its dealings with Beijing in the run-up to the November presidential election.
“It appears that the closer the election gets, the greater the tensions,” said Oliver Jones, senior market economist at Capital Economics. “The Chinese hawks in Washington seem to have the upper hand.”
The Chinese-owned TikTok video-sharing app has come to a head after U.S. officials expressed concerns that TikTok could pass data collected from Americans to the authoritarian Chinese government. President Trump signaled on Friday that he was considering banning the popular app. Microsoft said on Sunday it would go ahead with plans to buy back its U.S. operations following a call between Microsoft CEO Satya Nadella and Mr. Trump.
Microsoft shares rose 3% before the opening bell in New York.
Among European equities, HSBC Holdings fell 3.6% in London. The bank’s second-quarter profit fell 96% as disruption from the pandemic made it difficult for its efforts to refocus on Asia while dealing with growing political tensions between the United States and China. Siemens Healthineers fell 7.2% in Frankfurt after the medical technology company said it would acquire Varian Medical Systems for $ 16.4 billion, about 25% above its current market value.
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In the Asia-Pacific region, the main benchmark for Chinese stocks, the Shanghai Composite Index, rose 1.8% at the close of markets after a private gauge of manufacturing activity on the continent shook reached its highest level in more than nine years in July, driven by accelerated production and recovery in demand.
Japan’s Nikkei 225 led gains in Asian stocks, climbing 2.2% to end the trading session in positive territory for the first time since July 21. Sentiment improved on a weaker Japanese yen against the broad US dollar rebound, said Chang Wei Liang, a macro strategist at DBS Bank. A weaker yen helps improve profitability of Japanese exporters, supporting stocks.
The ICE Dollar Index, which tracks the greenback against a basket of other major currencies, rose 0.5% while remaining near its lowest level in more than two years. The dollar had taken a sharp turn this summer after a long rally, and its slide added further support to the market’s booming recovery, lifting US stocks and commodities up.
In bonds, the yield of the benchmark 10-year US Treasury index climbed to 0.564%, from 0.536% on Friday.
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A closely watched measure of economic activity indicated that factories in Europe were recovering. The purchasing managers index data for the manufacturing industry in the euro area crossed the key growth level, a score above 50, for the first time in a year and a half, when the manufacturing sector of the ‘Union has entered a recession. It had fallen during the coronavirus pandemic.
However, economists warned that industrial production was still well below pre-pandemic levels at the end of the second quarter. Survey compiler IHS Markit also said “severe job cuts” continued as companies operated at under-capacity.
“We had a nervous week last week, but the market likes a good PMI survey. It’s a rally against a backdrop of better-than-expected numbers, ”said Steen Jakobsen, chief investment officer and chief economist at Saxo Bank.
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The Institute for Supply Management releases is due to release its US Manufacturing Index for July at 10 a.m. ET. Factory activity is expected to show improvement for the third consecutive month, with manufacturers rebounding from closures and supply chain disruptions.
—Frances Yoon contributed to this article.