Global Stocks Rise, Buoyed by Reopening Hopes -- Update
May 26 2020 - 8:22AM
Dow Jones News
By Caitlin Ostroff and Joanne Chiu
Global stocks rose Tuesday on optimism about economies reopening
and the potential development of a coronavirus vaccine.
Futures linked to the S&P 500 advanced 1.8%, suggesting U.S.
stocks could gain when they resume trading Tuesday after the long
weekend. The pan-continental Stoxx Europe 600 advanced 0.8%, led by
gains in bank shares and the travel and leisure sector.
Investors were cheering signs of economic activity resuming
faster than some people had expected across parts of the U.S. and
elsewhere in the world. Restaurant bookings and spending on hotels
and airlines appears to be picking up in the U.S., and coincide
with a decline in the daily number of new infections. The U.K. has
laid out plans to reopen retail stores next month, while Italy, one
of the hardest-hit countries, saw people return to bars and
restaurants over the weekend.
"The market will drift higher from here, but it will be more of
a grind as we tiptoe to normality," said Hani Redha, a multiasset
portfolio manager at PineBridge Investments. A second wave of
infections would be "the litmus test of this rally. What happens
when we go back and how does the infection rate respond?"
Investors are also betting that one of at least 10 coronavirus
vaccines under development will eventually come to market, halting
the spread of the coronavirus and allowing normal business and
social activity to resume. On Monday, Novavax Inc. said it started
the first human study of its experimental vaccine. Drugmakers
including Pfizer Inc. and Moderna Inc. are also racing to develop a
vaccine. In premarket trading, shares of Novavax gained 18%.
"It looks like we have several shots on goal," said Mr. Redha.
While manufacturing a vaccine and disseminating it to the wider
population will take time, the number of potential candidates has
buoyed markets, he said. "Any kind of glimmer of hope about any
trial going well or any trial starting is going to be good."
In currency markets, China's central bank fixed its daily
reference rate for yuan trading at 7.1293 to the dollar, the
weakest level since February 2008. The onshore yuan is allowed to
trade in a band around this fix, which the People's Bank of China
sets based partly on previous market prices. The WSJ Dollar Index,
which measures the greenback against a basket of currencies,
declined 0.6%.
Global oil prices rose. West Texas Intermediate, the main U.S.
crude gauge, advanced 2.4% to $34.03 a barrel. Brent crude, the
global oil benchmark, advanced 1.4% to $36.61 a barrel.
Most major Asia-Pacific equity benchmarks ended the day higher.
In Japan, where the government lifted its state of emergency
Monday, the Nikkei 225 rose 2.6%.
Australia's benchmark index rose 2.9%, while Hong Kong's Hang
Seng Index advanced 1.9%. The Shanghai Composite gained 1%.
Markets are underpinned by early signs that global economic
activity is slowly improving, said Louis Lau, a California-based
director of investments at Brandes Investment Partners. Mobility
data, such as traffic volumes, is encouraging and might point to a
gradual recovery, he said.
"People have been locked up for a few months, so I think they
are eager to resume their normal lives," Mr. Lau said. "The
recovery will be in fits and starts, and it may be a little jumpy,"
with some states that are quicker to reopen potentially risking a
second wave of outbreaks, he said.
Reversing lockdowns could take longer than implementing them,
according to Bhaskar Laxminarayan, chief investment officer for
Asia at Bank Julius Baer. "The reopening will be a much more
laborious process," he said.
The pace of recovery is likely to vary country by country, with
governments in some developing nations unable to spend heavily to
support their economies. Mr. Laxminarayan said. Lasting shifts in
behavior and spending patterns could affect travel and retail, with
potential economic consequences, he said.
Data on U.S. consumer confidence, due at 10 a.m. ET, will give
investors an indication of how American households view the U.S.
economy. Figures for May are expected to weaken with unemployment
levels soaring and economic prospects still dim. Investors will
also look to data released at the same time on new home sales in
April to assess the state of the housing market.
In the bond market, the yield on 10-year Treasurys ticked up to
0.690%, from 0.659% Friday. Bond yields in northern European
countries rose while yields fell in southern nations, including
Italy and Greece. Yields and prices move inversely.
Markets have started to price in the passing of a Europe-wide
recovery fund proposed by France and Germany, said James Athey,
senior investment manager at Aberdeen Standard Investments. The
spread, or difference, between German and Italian yields are at
their smallest since April 9.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Joanne
Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
May 26, 2020 08:07 ET (12:07 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.