May 7, 2020

Stocks climb, shaking off U.S. jobs data, thanks to China trade relief


NEW YORK/LONDON (Reuters) – World shares rose on Thursday after Chinese exports proved far stronger than expected, suggesting a recovery was under way, but the dollar fell from two-week highs as another report showed millions of more Americans were unemployed.

FILE PHOTO: A pedestrian wearing a face mask rides an escalator near an overpass with an electronic board showing stock information, following an outbreak of the coronavirus disease (COVID-19), at Lujiazui financial district in Shanghai, China March 17, 2020. REUTERS/Aly Song

Gold jumped 2% as the weak U.S. economic data heightened fears over a coronovirus-induced global downturn.

Initial U.S. jobless claims for state unemployment benefits totalled a seasonally adjusted 3.169 million for the week ended May 2, down from a revised 3.846 million in the prior week, the Labor Department’s weekly jobless claims report showed.

The data reinforced economists’ expectations of a protracted recovery for the U.S. economy, which is reeling from nationwide lockdowns to slow the spread of the coronavirus pandemic.

“The pace is slowing down, which is providing some optimism that we are finally going to see things bottom out,” said Ed Moya, senior market analyst at OANDA, referring to unemployment claims.

Investors took heart on news that Moderna Inc (MRNA.O) said it could start trails for a COVID-19 vaccine by early summer.

“The more vaccine trials that are out there, the more optimism that one will stick,” Moya said.

Stocks globally were bolstered by Beijing reporting a 3.5% rise in exports in April from a year earlier, confounding expectations of a 15.1% fall and outweighing a 14.2% drop in imports.

The unexpected strong showing boosted speculation China could recover from its coronavirus lockdown quicker than expected and support global growth in the process.

The Dow Jones Industrial Average .DJI rose 250.55 points, or 1.06%, to 23,915.19, the S&P 500 gained 37.37 points, or 1.31%, to 2,885.79 and the Nasdaq Composite .IXIC added 131.94 points, or 1.49%, to 8,986.33.

MSCI’s gauge of stocks across the globe gained 1.02%.

“It’s clear that this virus has gone from east to west and we are now seeing that in the data,” said Societe Generale’s Kit Juckes, pointing to the China numbers and relatively better purchasing managing data in countries such as Australia.

But with the full economic impact of the novel coronavirus pandemic still to be seen and huge amounts of debt potentially pushing up borrowing costs, “the market is hugely split between die-hard bears and buy-on-dip buyers”, he added.

Markets traded cautiously overnight with renewed Sino-U.S. tensions lurking in the background.

U.S. President Donald Trump said he would be able to report in about a week or two whether China is meeting its obligations under a trade deal, as Washington weighed punitive action against Beijing over its handling of the coronavirus outbreak.

The flow of economic data remained grim, with the Bank of England warning that the coronavirus crisis could cause the country’s biggest economic slump in 300 years.

“Despite their dizzying rally, we continue to be cautious on equities in the near term,” Luca Paolini, chief strategist at asset manager Pictet said. “Markets seem to be overestimating the speed of economic recovery.”

WORLD’S BIGGEST BORROWER

Bond markets saw one of the largest shifts in a while after the U.S. Treasury said it would borrow $2.999 trillion during the June quarter, five times more than the previous single-quarter record.

It will sell $96 billion next week alone and a surprising amount of that will be at longer tenors, which in turn pushed up long-term yields and steepened the curve.

The 30-year bond US30YT=RR last rose 78/32 in price to yield 1.3214%, from 1.413%.

The early rise in Italy’s yields to over 2% reflected worries caused by a German court ruling this week targeting the European Central Bank’s bond purchase programme.

The U.S. dollar fell from two-week highs as investors booked profits on the currency’s gains this week before Friday’s U.S. nonfarm payrolls report for April, which could show massive job losses amid a COVID-19 pandemic that has ravaged the global economy. The dollar index fell 0.291%, with the euro EUR= up 0.28% to $1.0824. The euro was hurt by a gloomy economic outlook from the European Commission.

In commodity markets, gold had eased on expectations that supplies will grow as bullion refineries resume operations but turned higher. U.S. gold futures settled 2.2% higher at $1,725.80.

Oil prices fell after being up more than 6% during Thursday trading as global demand worries offset bullish news that Saudi Arabia increased its official crude selling price and a surprise rise in Chinese exports last month.

U.S. crude settled 44 cents lower at $23.55 per barrel and Brent LCOc1 was at down 26 cents at $29.46.

Additional reporting by Wayne Cole in Sydney; Editing by Bernadette Baum and Nick Zieminski


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