By Anna Isaac
U.S. stocks rose on Monday, as investors weighed halting steps
toward a new coronavirus relief package and the country registered
its lowest number of new infections in weeks.
The S&P 500 ticked up 0.6% in early New York trading. The
index climbed 5.5% in July. The Dow Jones Industrial Average added
130 points, or 0.5%, while the Nasdaq Composite Index advanced
0.9%.
Trading volumes are expected to slide in coming weeks with the
onset of the summer vacation season, leading to an increase in
volatility.
Investors were heartened by a smaller daily rise in U.S. Covid
19 cases, despite delays to a deal on further fiscal support for
the American economy. The U.S. reported more than 47,000 new
coronavirus cases, the smallest daily increase in almost four
weeks, after posting a record number of new infections in the month
of July.
"A couple of weeks ago, U.S. cases were rising by 40-50% on a
weekly basis. They're now falling. Not as fast as they might
appear, because testing has dropped, but they are still lower and
so is the rate of hospitalization. Markets like that," said Ian
Sheperdson, chief economist at Pantheon Macroeconomics.
Overseas, the pan-continental Stoxx Europe 600 rose 1.7%,
bolstered by survey data showing signs of recovery in euro area
factories.
Democrats and Republicans remained at odds in weekend
negotiations on a new economic relief package, including aid to
replace the federal $600-a-week boost to unemployment benefits that
expired Friday. The White House had hoped to pass a short-term
extension of the federal unemployment insurance, but Democrats want
to negotiate a comprehensive package of relief, including state and
local aid.
"The slowness with which Washington is coming to an agreement on
a fiscal policy shows some fatigue. A deal will likely come, but
after some big fiscal cliffs have been passed," said James
McCormick, a strategist at NatWest Markets.
Secretary of State Mike Pompeo's comments over the weekend that
the White House may take action against Chinese software companies
stoked concerns about deteriorating relations between the world's
two largest economies. Heightened tensions between Beijing and
Washington have weighed on investor confidence for weeks, with
growing expectations that the U.S. government will take a harder
line in relations with Beijing in the run up to November's
presidential election.
"It seems the closer the election gets, the fiercer tensions are
likely to be," said Oliver Jones, senior markets economist at
Capital Economics. "The China hawks in Washington appear to have
the upper hand."
The video-sharing app TikTok, owned by a Chinese company, has
become one flashpoint after U.S. officials expressed concerns that
TikTok could pass on the data it collects from Americans to China's
authoritarian government. President Trump on Friday signaled that
he was considering a ban of the popular app. Microsoft said Sunday
that it will move forward with plans to buy its U.S. operations
following a call between Microsoft CEO Satya Nadella and Mr.
Trump.
Shares in Microsoft rose 3% ahead of the opening bell in New
York.
Among European equities, HSBC Holdings slid 3.6% in London. The
bank's second-quarter profit fell 96% as the disruption caused by
the pandemic complicated its efforts to refocus on Asia while
dealing with the rising U.S.-China political tensions. Siemens
Healthineers fell 7.2% in Frankfurt after the medical technology
company said it would acquire Varian Medical Systems for $16.4
billion, or roughly 25% above its current market value.
In the Asia-Pacific region, China's major equity benchmark, the
Shanghai Composite Index, rose 1.8% by the close of trading after a
private gauge of manufacturing activity on the mainland rose in
July to its highest level in more than nine years, boosted by
accelerated production and recovering demand.
Japan's Nikkei 225 led Asian equities' gains, climbing 2.2% to
end the trading session in positive territory for the first time
since July 21. Sentiment improved due to a weaker Japanese yen
against the U.S. dollar's broad rebound, according to Chang Wei
Liang, a macro strategist at DBS Bank. A weaker yen helps lift
profitability of Japanese exporters, supporting stocks.
The ICE Dollar Index, which tracks the greenback against a
basket of other major currencies, ticked up 0.5% while remaining
near its lowest level in over two years. The dollar had made a
sharp U-turn this summer following a long rally, and its slide
added further support to the booming market rally, lifting U.S.
stocks and commodities.
In bonds, the yield on the benchmark 10-year U.S. Treasury
ticked up to 0.564%, from 0.536% Friday.
A closely watched metric of economic activity signaled that
European factories are staging a recovery. Purchasing Managers
Index data for manufacturing in the euro area broke through the key
level indicating growth, a score of above 50, for the first time in
a year and half, when the bloc's manufacturing sector entered
recession. It had plummeted during the coronavirus pandemic.
However, economists cautioned that industrial production was
still well below pre-pandemic levels at the end of the second
quarter. The compiler of the survey, IHS Markit, also said "severe
job-cutting" continued as firms were operating under capacity.
"We had a nervous week last week, but the market loves a good
PMI survey. It's a rally on the back of the better than expected
numbers," said Steen Jakobsen, chief investment officer and chief
economist at Saxo Bank.
The Institute for Supply Management releases is due to release
its U.S. manufacturing index for July at At 10 a.m. ET. Factory
activity is expected to show an improvement for the third straight
month as manufacturers rebound from shutdowns and supply-chain
disruptions.
--Frances Yoon contributed to this article.
Write to Anna Isaac at anna.isaac@wsj.com
(END) Dow Jones Newswires
August 03, 2020 09:47 ET (13:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.