Global stocks pushed higher as investors brushed aside geopolitical risks and focused instead on hopes of more central bank support and a swift rebound for economies rocked by the pandemic.
The S&P 500 index opened up 0.7 per cent on Wall Street, setting it on track to notch a fourth straight day of gains. The Dow Jones Industrial Average rose 0.9 per cent and the tech-weighted Nasdaq gained 0.4 per cent.
US stocks have forged higher despite mass protests in cities across the country after the death of an African-American man at the hands of police and rising tensions between Beijing and Washington. The S&P 500 is now less than 10 per cent off its all-time high, as investors bank on long-term expectations for growth.
The gains in Europe were sharper. FTSE 100 was up 1.4 per cent, taking the London blue-chip index’s rise this week to nearly 4 per cent. Frankfurt’s Xetra Dax gained 2.8 per cent, and in Paris the CAC 40 rose 2.5 per cent.
“Compared to market drawdowns in past recessions, the speed and scale of this rebound is unusual,” said Kerry Craig, global market strategist at JPMorgan. “The difference here is huge amounts of stimulus from governments and central banks.”
In a sign the rally in equity markets was broadening, stocks in Europe have outperformed Wall Street this week.
“Just as the winners of the last two months were running out of steam, along come the laggards to the party,” said Deutsche Bank strategist Jim Reid, noting that many expect the European Central Bank to announce an expansion of its stimulus programme on Thursday.
The yield on the 10-year US Treasury rose above 0.72 per cent and the dollar weakened to its lowest level in almost three months as investors embraced riskier assets. The dollar index, which measures the currency against a basket of its global peers, fell for a seventh straight session.
“The FX moves we are witnessing may be more than just a short squeeze and the start of a broader trend away from the dollar,” foreign exchange analysts at ING said.
Survey data released on Wednesday showed that business activity in Europe had begun to recover as lockdowns loosened, although German unemployment has risen to a four-year high in a sign of the significant economic damage caused by the pandemic.
Oil prices gave up earlier gains that had seen Brent climb back above $40 for the first time in almost three months. Brent, the international benchmark, fell 0.7 per cent to $39.25 a barrel. US marker West Texas Intermediate slipped 0.1 per cent to $36.80.
A planned Opec+ meeting on Thursday was in doubt after a dispute erupted over producers’ compliance with an agreement to curb production.
Equity markets in the Asia-Pacific region rose, with South Korea’s Kospi adding nearly 3 per cent after Seoul unveiled an additional $29bn stimulus programme to help support the economy.
“Markets are in full liquidity-on mode” as investors look through headwinds including geopolitical friction such as over the future of Hong Kong, strategists at HSBC said in a note.
“Instead, newsflow around new stimulus packages and possible vaccine breakthroughs are greeted jubilantly. This might continue in the short term, but is hardly sustainable,” they added.
Elsewhere in Asia, China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was broadly flat after the Caixin purchasing managers’ index showed that Chinese services sector activity rose for the first time in four months in May. New orders jumped at the fastest pace in a decade, indicating a robust recovery in certain parts of the world’s second-largest economy following its Covid-19 outbreak.
