LONDON: World stock markets climbed to more than two-week highs on Tuesday after U.S. President Donald Trump’s return to the White House from COVID-19 treatment and on hopes of a giant new U.S. stimulus package.
Despite a subdued London FTSE , Europe benefited from near 2% jumps in battered banks and travel stocks , along with what Germany called a “remarkable” leap in export orders, to join Asia and Wall Street’s overnight rallies. [GVD/EUR]
MSCI’s main world stocks benchmark was up 0.2% at a two-week high too after Trump’s return from the Walter Reed Medical Center military hospital outside Washington on Monday eased nerves about possible disruption to next month’s election.
Gold [GOL/], bonds [GVD/EUR] and the dollar [/FRX] all dipped amid the modestly improved risk appetite, though Wall Street futures had slipped into the red.[.N][O/R]
“The market is slightly short of oomph,” said Societe Generale’s Kit Juckes, pointing to Europe’s subdued morning.
“It has not managed to get a meaningful lift from it (Trump leaving hospital) and I think it is threatening to take a time out and wait for what comes next.”
Trump said he felt “real good” after a three-night hospital stay, although one of his doctors cautioned he may not be out of the woods until later in the week.
MSCI’s broadest index of Asia-Pacific shares had risen 0.7% to a two-and-a-half-week high, with Hong Kong climbing 0.8% and Japan’s Nikkei adding 0.5%. China’s markets remained closed for a public holiday. [.T]
U.S. stimulus hopes were still bubbling in the background after House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone for about an hour on Monday and said they were preparing to talk again on Tuesday.
“If we do see some form of stimulus coming through, I think the market will take it in a positive light,” said J.P. Morgan Asset Management’s Chief Asia Market Strategist Tai Hui.
RECOVERY CONCERNS
S&P 500 futures were a touch weaker after the best daily gain on the S&P in a month overnight, while the optimism left safe-haven asset demand mixed.
Gold recovered from an overnight wobble to perch at $1,917 per ounce, after hitting a two-week peak on Monday.
Bond markets also joined in, as a sharp selloff in U.S. bonds on Monday carried over into Asia and Europe.
Benchmark 10-year German government bond yields, which move inverse to price, hit their highest in over a week. [GVD/EUR]Japanese government bond futures fell to a one-month low in the steepest drop in more than five weeks and South Korean yields jumped. [JP/T] However, analysts said selling in other markets was more subdued than in the U.S. market because regional investors are beginning to price in a victory for Democratic presidential candidate Joe Biden in the Nov. 3 election.
U.S. Federal Reserve chief Jerome Powell was also scheduled to speak later in the day, giving traders extra reason for patience, though caution from European Central Bank President Christine Lagarde was already setting the tone.
“We now fear that the containment measures that have to be taken by authorities will have an impact on this (economic) recovery,” Lagarde said, adding that it might prevent a long-hoped for V-shaped rebound.
U.S. 10-year yields were steady at 0.77% while in the currency markets, the dollar was under minor pressure from most other majors with the exception of the safe-haven Japanese yen and Brexit-bound sterling . [FRX/]
The dollar firmed on the yen to reach 105.62 yen , not far short of its highest levels in three weeks.
The Australian dollar gained briefly after the Reserve Bank of Australia left rates on hold, as expected, but later fell back, and the potential for further monetary easing capped gains.
Oil jumped more than 5% overnight and edged higher still in Europe, supported by the Trump news and a supply squeeze as a strike shut six Norwegian offshore oil and gas fields. [O/R]
Brent crude climbed 1.7% at $42.03 a barrel while U.S. crude last stood at $39.85 a barrel, up 1.6%.
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