TOKYO / NEW YORK (Reuters) – Asian equities peaked at nearly three months on Wednesday as hopes of stimulus and easing of social restrictions around the world outweigh caution in the face of a multitude of concerns from coronavirus to growing civil unrest in the United States.
FILE PHOTO: A pedestrian wearing a face mask walks near a viaduct with an electronic card showing information on stocks, following an epidemic of coronavirus disease (COVID-19), in the financial district of Lujiazui in Shanghai, China, March 17, 2020. REUTERS / Aly Chanson
The largest MSCI Asia Pacific index outside Japan .MIAPJ0000PUS advanced 1.3%, extending its rally for the fifth consecutive day to a level seen on March 9.
Japan’s Nikkei .N225 rose 1.2% to its highest level since late February, while mainland China’s CSI300 .CSI300 rose 0.4% to exceed its May peak at a high. 12 weeks.
E-mini futures for the US S&P 500 EScv1 rose 0.2% in Wednesday morning trading, extending gains so far this week to 1.4%.
“The good times continue to roll in the risky markets,” said Mazen Issa, senior FX strategist at TD Securities, in a report. “As intense as the rally was, it should continue, as the scale of the equity rally has now spread outside the United States.”
The MSCI .MIWD00000PUS equity tonnage rose 0.3%, bringing the gain from its March 23 low to almost 36%. Despite the bottlenecks to control the COVID-19 pandemic, which have pushed many economies into contraction, the world index has been down by less than 8% since the start of the year.
There are signs of business recovery as governments slowly restart their economies.
In China, which managed to contain the epidemic in March, a close survey of activity in the service sector CNPMIS = ECI showed that its index returned to pre-epidemic levels in May.
Various high-frequency data, such as restaurant reservations and mobility data, show that activity is also gradually recovering in many developed countries after reaching a low in April.
Still, some analysts warn that the recovery is mainly due to short coverage by speculators who had sold stocks earlier during a global recession.
They say there are a variety of risks that could hamper the global economy, including a second wave of COVID-19 infections, Sino-US tensions and mounting social unrest in the United States following protests against brutality politics.
“The stock markets are betting on a V-shaped recovery in July-September. But the gap between the stock market and the real economy is widening. Many business leaders now have to ask themselves why their companies’ shares are rising so much, “said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The US Treasury yield curve widened, partly reflecting the sale of more public debt to finance massive stimulus efforts.
The 30-year US Treasury yield reached 1.532% US30YT = RR, its highest level since mid-March.
On the other hand, expectations of central bank policy support kept shorter yields under control, widening the yield spread between 5 and 30 year Treasury bills US5US30 = TWEB to 118 basis points, its highest level since early 2017.
The European Central Bank is expected to accelerate the purchase of stimulating bonds at its meeting on Thursday, while others believe that the US Federal Reserve could also improve its easing with some key officials discussing the control of the optional yield curve.
Oil prices have climbed more than 1% to a nearly three-month high in the optimism that major producers will continue to cut production as the world recovers from the coronavirus pandemic. [O/R]
Crude oil West Texas Intermediate (WTI) CLc1 gained 1.9% to $ 37.50, while crude Brent LCOc1 rose 1.2% to $ 40.04 a barrel.
Gold did little, gold XAU = trading almost flat at $ 1,728 per ounce.