World stocks jump to 3-month high as recovery hopes outweigh looming risks

New York, Global shares vaulted to a near three-month high on Wednesday as hopes of more stimulus and further easing in social restrictions around the world outweighed caution over a host of worries from the coronavirus to growing U.S. civil unrest.

Pan-European Euro Stoxx 50 futures were up 1.27% while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.8%, extending its rally into a fifth straight day to reach a level last seen on March 9, Reuters reported.

Japan’s Nikkei rose 1.1% to its highest level since late February, while mainland China’s CSI300 rose 0.6% to break above its May peak to a 12-week high. South Korea’s Kospi gained more than 3%. In those three East Asian countries, where the COVID-19 is relatively contained, the indexes have recovered substantially to be only about 5-6% below this year’s peaks.

MSCI’s gauge of stocks across the globe rose 0.3%, hitting a three-month high and extending the gain from its March 23 low to almost 36%. Despite pandemic lockdowns that have pushed many economies into contraction, the global index is down year-to-date less than 8%.

There are some signs of recovery in business activity as governments restart their economies.

In China, which managed to quash the outbreak by March, a closely-watched survey of service sector activity recovered to pre-epidemic levels in May.

High-frequency data, such as restaurant bookings and mobility data, shows activity is gradually recovering in many developed countries after bottoming out in April, even though a return to pre-epidemic levels still seems far-off.

Risks that could hobble the global economy include a second wave of COVID-19 infections, Sino-U.S. tensions and rising social unrest in the United States following protests against policy brutality, they said.

“The gap between stock market and the real economy is growing. Many corporate executives must be now wondering why their companies’ shares are rising so much,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

The European Central Bank is expected to ramp up stimulative bond purchases when it meets on Thursday, while some think the U.S. Federal Reserve could also enhance its easing with a few key officials discussing yield curve control as an option.

In the currency market, economic optimism supported risk-sensitive currencies and pushed down the U.S. dollar.

The Australian dollar rose as much as 1.2% to a five-month high of $0.6982, while the euro ticked up 0.25% to $1.1197.

The safe-haven Japanese yen hit a two-month low of 108.85 to the dollar before bouncing back to around 108.57 per dollar.

 

Source: Bahrain News Agency