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Tuesday, June 02, 2020

Asian stocks rally on treatment hopes, currencies await ECB

Japan's Nikkei, returning from a holiday on Wednesday, jumped 2.5% to a seven-week high as well, catching up on the week's gains.

By: Reuters | Singapore/new York | Updated: April 30, 2020 10:42:00 am
GLOBAL MARKETS - Asia shares jump but pandemic hangs heavy over outlook, Asian stock markets, MSCI ex-Japan starts higher on Tuesday, Nikkei rises too, Signs of peaking in coronavirus outbreak helping sentiment, Confidence tempered by fears of global recession, Investors eye Chinese trade data, corporate results, global market news, world market news update, business news india, indian express business news A visitor takes a photo of screens displaying stock indices at the Tokyo Stock Exchange (TSE), operated by Japan Exchange Group Inc. (JPX), in Tokyo, Japan, on Monday, March 11, 2018. (Image source: Bloomberg)

Asian stocks rose to a fresh seven-week high on Thursday, lifted by encouraging early results from a COVID-19 treatment trial, though bonds and currencies held cautious ranges ahead of a European Central Bank meeting later in the day.

Anthony Fauci, the top US infectious disease official, said Gilead’s antiviral remdesivir will become the standard of care for COVID-19 after early results from a trial seemed to show it helped speed recovery.

The news rallied Wall Street on Wednesday and lifted MSCI’s broadest index of Asia-Pacific shares, excluding Japan, by 0.8% to its highest since mid-March.

Japan’s Nikkei, returning from a holiday on Wednesday, jumped 2.5% to a seven-week high as well, catching up on the week’s gains. More caution was evident in other asset classes, with the US dollar firm and US futures steady.

“Any positive medical development is helpful,” said Westpac FX analyst Sean Callow.

“But no-one should be counting on a major breakthrough – the key for markets is control of the spread of the virus,” he said, another front where there are positive signs.

“I think it is reasonable for markets to be less bearish than they were in mid-March…but it’s far too early for a sustained rally in risk appetite, so we’re probably due for a little bit of a pullback.”

Futures for Wall Street’s S&P 500 handed back early gains to turn flat and the dollar held its own against the risk-sensitive Antipodean currencies – rising for the first time in a week against the Aussie and kiwi.

The yield on benchmark US 10-year Treasuries stayed parked at 0.6237%, after the US Federal Reserve left interest rates near zero and gave no indication of lifting them any time soon.

Australia’s ASX 200 rose 1.4%. The Shanghai Composite rose 1%. Markets in Hong Kong and South Korea were closed for public holidays.

OF MONEY AND MEDICINE

Markets have been excited by the prospect of a COVID-19 treatment because it may help countries emerge from lockdowns – even though investors’ hopes don’t seem to take into account regulatory and distribution difficulties should a treatment be found.

Another focus has been the enormous fiscal and monetary policy efforts from world governments and central banks to staunch the economic damage from the pandemic.

That has the ECB under increasing pressure to deliver even more support on Thursday – probably by expanding its bond buying programme – as European leaders seem unable to agree on the details of a rescue package.

“The tone has been set for the ECB to ‘do whatever it takes’ via its bond purchase programmes in terms of size, composition and maturity,” strategists at Singapore’s DBS Bank said in a note.

A press conference following the ECB meeting is due at 1330 GMT.

The euro was stuck at $1.08640 on Thursday, near the top of a range where it has been pegged for two weeks, but drifted lower as the dollar broadly firmed.

The greenback scraped off multi-week lows against the Antipodean currencies and last sat at $0.6537 per Aussie and $0.6122 per kiwi.

Elsewhere there was encouraging news from South Korea, which on Thursday reported no new domestic coronavirus cases for the first time since its Feb. 29 peak.

However, comments from US President Donald Trump accusing China of seeking to defeat his re-election bid in November gave cause for renewed caution.

Gold was steady at $1,711.31 per ounce.

Brent crude and US crude futures each rose more than 6% amid optimism that a storage squeeze is not as bad as first feared, and that demand for fuel may soon return.

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