Oil trades higher as global stocks gain on promising vaccine results

Global stocks followed Wall Street higher as encouraging results for an experimental Covid-19 vaccine and hopes of further stimulus for pandemic-hit economies outweighed escalating US-China tension over Hong Kong.

Futures markets tipped the S&P 500 to rise 0.9 per cent when Wall Street opens later in the day, while London’s FTSE 100 was expected to climb 1.1 per cent.

Oil prices edged higher after a June report from Opec showed the oil-producing group’s output had fallen almost 2m barrels from a month ago.

Brent crude, the international benchmark, added 0.5 per cent to $43.10 a barrel while US marke West Texas Intermediate rose the same degree to $40.49.

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Japan’s benchmark Topix index was up 1.5 per cent on Wednesday afternoon in Asia while Australia’s S&P/ASX 200 rose 1.8 per cent, but Chinese shares lost ground.

Hong Kong’s Hang Seng was down 0.5 per cent after President Donald Trump signed legislation rescinding the city’s special trade privileges with the US and clearing the way for sanctions on Chinese officials in response to the national security law imposed by Beijing.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks shed 0.6 per cent. Louis Tse, managing director at VC Brokerage, noted that investors had been expecting Mr Trump to sign the legislation for several weeks and that the news “was more or less discounted.”

However, the mood in the market dimmed as Beijing vowed to retaliate. Frank Benzimra, head of Asia equity strategy at Société Générale, said while vaccine hopes were buoying much of the region, China shares were lagging due to concerns the mainland stock market might be experiencing a bubble.

He added he believed China’s rally “has further to go”. Overnight on Wall Street, the S&P 500 closed 1.3 per cent higher, bouncing back from initial losses after Lael Brainard, a governor at the US Federal Reserve, spoke out in favour of doing more to boost the economy.

The promise of more support for the market helped counter growing concerns over a resurgence of infections in the US that have forced several states including to roll back economic reopenings.

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On Tuesday the US reported a single-day rise of more than 60,000 cases for the fifth day in a week, according to COVID Tracking Project data, and record daily deaths in Florida, North Carolina and Alabama.

US biotech company Moderna said on Tuesday that early-stage trials of its potential Covid-19 vaccine had produced immune responses in all 45 participants and no safety issues that would derail further trials.

Its shares surged 14 per cent in after-hours trading. Kicking off what is set to be a grim earnings season, three of the biggest US banks — Wells Fargo, JPMorgan Chase and Citigroup — said on Tuesday that they had set aside a combined $28bn for current and future loan losses due to the pandemic, with Wells Fargo reporting its first quarterly loss since the financial crisis.

However, Kasper Elmgreen, head of equities at fund manager Amundi, said a “fairly brutal” results season would not disrupt equity markets too much since much of the bad news was priced in.

“The focus is more on what the companies can say in terms of forwarding guidance,” he said. “They are navigating a ship with very low forward visibility and a very wide range of outcomes.”