Global stock markets have rallied to four-week highs as investors count on a revival in Chinese activity to boost global growth, even as surging coronavirus cases delay business reopenings across the United States.
MSCI’s All-Country World Index, which tracks shares across 49 countries, rose 0.7 per cent on Monday to its highest since June 6 after the start of European trading.
European shares jumped, with the pan-European STOXX 600 index rising 1.64 per cent. Stocks exposed to China, such as car makers , industrials, energy firms and luxury goods makers rose strongly, while banks also rallied.
In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.6 per cent to its highest since February, with the bullish sentiment spilling into other markets.
E-Mini futures for the S&P 500 firmed 1.2 per cent.
Chinese blue chips jumped 5.7 per cent on top of a 7.0 per cent gain last week to their loftiest level in five years. Even Japan’s Nikkei, which has lagged with a soft domestic economy, managed a rise of 1.8 per cent.
Among the reasons investors cited for the buying was improving economic data – UBS noted Citi’s Economic Surprise Index for the US has risen to its highest level on record. The index measures how well economic data releases are faring relative to consensus forecasts.
Some cited an editorial in the China Securities Journal, which said on Monday that China needed a bull market to help fund its rapidly developing digital economy.
Most markets gained ground last week as a raft of economic data from June beat expectations, although the resurgence of coronavirus cases in the United States is clouding the future.
In the first four days of July alone, 15 states have reported record increases in new cases of COVID-19, which has infected nearly three million Americans and killed about 130,000, according to a Reuters tally.
Analysts estimate that reopenings affecting 40 per cent of the US population have now been wound back.
The risks, combined with unceasing stimulus from central banks, have kept sovereign bonds supported in the face of better economic data. While US 10-year yields edged up to 0.7 per cent on Monday, well off the June top of 0.959 per cent.
Germany’s benchmark 10-year Bund yield edged up, pulling further away from recent five-week lows in the face of rallying equity markets.
Citi analysts estimate global central banks are likely to buy $US6 trillion of financial assets in the next 12 months, more than twice the previous peak.
Major currencies have been largely range-bound with the dollar index down 0.3 per cent at 96.894, having spent an entire month in a snug band of 95.714 to 97.808.
The US dollar was a shade firmer on the yen at 107.57 on Monday, while the euro rose above the $US1.13 mark.
In commodity markets, gold has benefited from super-low interest rates across the globe as negative real yields for many bonds make the non-interest paying metal more attractive.
Spot gold traded at $US1,776.21 per ounce, just off last week’s peak of $US1,788.96.
Oil prices were mixed with Brent crude futures up 1.87 per cent at $US43.58 a barrel, while US crude gained 0.84 per cent to $US40.99 amid worries the surge in US coronavirus cases would curb fuel demand.