Global Stocks Jump, Led by Surge in Chinese Markets
July 06 2020 - 11:11AM
Dow Jones News
By Anna Isaac and Akane Otani
U.S. stocks jumped Monday following the holiday weekend, lifted
by shares of everything from medical technology companies to
banks.
The Dow Jones Industrial Average climbed 273 points, or 1.1%, to
26100. The S&P 500 added 1.2% and the Nasdaq Composite advanced
1.8.
Global stocks have rallied to start the week, with China's
Shanghai Composite Index soaring to its highest level since early
2018. That was even as data continued to point to a rise in
coronavirus cases in the U.S., which some investors have worried
might force officials to further delay reopening plans across the
country.
At least part of stocks' recent gains appear to stem from bets
that the U.S. will be able to avoid having to reinstate widespread
restrictions on business.
"Very few people think that there will be as draconian lockdowns
again," said James Athey, a senior investment manager at Aberdeen
Standard Investments. Mr. Athey added that investors are also
keeping hopes pinned on news related to vaccine and treatment
developments.
Shares of Becton Dickinson rose 2.2% after the company said it
was launching a rapid diagnostic test for the new coronavirus.
Meanwhile, Uber Technologies added 4.3% after it said that it
would buy Postmates for about $2.65 billion in an all-stock
transaction.
Bank shares also bounced higher, with Bank of America rising
1.7% and Goldman Sachs up 3.1%. Many bank stocks are down
substantially for the year, hurt by prospects of a drop in lending
and consumer activity due to the pandemic.
Some analysts cautioned that the market's recent surge could run
out of momentum in the coming months, given the potential for
economic data to disappoint at a time when stocks look expensive
relative to expected earnings. Although reports have shown swaths
of the economy rebounding, many measures of consumer spending
remain far below prepandemic levels.
"Quite frankly, we're not that optimistic about markets for the
second half of the year," said John Vail, chief global strategist
at Nikko Asset Management, who added that the firm is expecting
middling returns for U.S. stocks for the year.
Elsewhere, the Stoxx Europe 600 rose 1.1% after data showed
German factory orders rebounded 10.4% in May after falling sharply
during the lockdown in April. The increase was driven by both
domestic and foreign orders, as economies around the world began to
reopen. Data also showed eurozone retail sales were stronger than
expected in May.
Shares of Germany's second-largest lender Commerzbank jumped
8.2% after the bank said its chairman and chief executive would
step down. The bank has been under pressure from one of its major
investors, Cerberus Capital Management.
Signs that economic activity is rebounding from
coronavirus-related lockdowns have helped lift global markets,
analysts say.
"In recent weeks, the data has looked very positive from China.
Its economy is back in motion, and that should lift global equities
a bit," said Seema Shah, chief strategist at Principal Global
Investors.
China market analysts said it was hard to pinpoint a single
clear driver for Monday's surge, though some pointed to a
front-page editorial in state-owned China Securities Journal. It
said fostering a "healthy bull market" was important, given China's
increasingly complicated international relations, intense financial
and technological competition, and the challenge of controlling
internal financial risks.
Investors compared the leap in Chinese financial markets to a
wave of optimism that drove a historic bull run in 2014 and 2015
that eventually ended in a ruinous market crash.
"The article was a clear indication that China's government is
determined to support the rally in local stocks. They're capable of
doing that. They've proved that in the past by using state-owned
entities to purchase local stocks," said Piotr Matys, foreign
exchange strategist at Rabobank.
Xie Yu contributed to this article.
Write to Anna Isaac at anna.isaac@wsj.com and Akane Otani at
akane.otani@wsj.com
(END) Dow Jones Newswires
July 06, 2020 10:56 ET (14:56 GMT)
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