SYDNEY / HONG KONG (Reuters) – Asian stocks retreated on Monday and oil prices peaked for five weeks as countries’ efforts to reopen their economies hoped the world would be closer to emerging from recession.
FILE PHOTO: Pedestrians wearing face masks walk near an overpass with an electronic board showing stock information following a coronavirus disease outbreak (COVID-19) in the Lujiazui financial district of Shanghai, China, March 17, 2020. REUTERS / Aly Song / Photo file
Warm weather is luring much of the world out of blocking coronaviruses, as outbreak centers from New York to Italy and Spain are gradually removing restrictions that have kept millions chilled for months.
Positive sentiment overcame escalating tensions in the United States and China, sending E-Mini futures for the S&P 500 to 1.1 percent, although the results of a bunch of US retailers are likely to lead to a messy reading.
EUROSTOXX 50 STXEc1 futures won 1.8% and FFEc1 FTSE futures were 1.5% higher.
Some analysts have warned not to read too much about early economic recovery.
“The economies of Europe and the United States probably collapsed in April and are slowly starting to recover,” Barclays economist Christian Keller wrote in a note.
“However, input from most economies underscores the depth of the contraction, increasing the risks of long-term scarring that could undermine the recovery.”
Data in Japan confirmed that the world’s third-largest economy fell into recession in the first quarter, which set it off for its worst post-war downturn as the coronavirus is severe.
However, the Nikkei .N225 in Tokyo rose 0.6% as signs of a slowdown in coronavirus infections raised optimism that Japan would soon reduce restrictions in more prefectures. Chinese blue chips were also up 0.6%.
MSCI’s broadest Asia-Pacific equities index outside of Japan, which traded slightly higher for most of the day, was the last of a small part.
Federal Reserve Chairman Jerome Powell took a cautious line in an interview over the weekend, saying the US economic recovery could extend deep into next year and a full return could depend on the coronavirus vaccine.
At the end of Sunday, Powell outlined the possible need for another three to six months of state financial aid for businesses and families.
Data on Friday showed that retail sales and industrial production fell in April, which put the US economy on the verge of its deepest contraction since the Great Depression.
Trade tensions between the United States and China have added to uncertainty, with Beijing warning that it opposes the latest rules against telecommunications company Huawei.
U.S. lawmakers and officials are preparing proposals to get U.S. companies to relocate operations or key suppliers outside China, which include tax breaks, new rules and carefully structured subsidies.
In a report on corporate dividend prospects, Janus Henderson Investors said Europe and the United Kingdom would be hit harder by North America, while technology, healthcare, food and most major consumer sectors needed to be safer.
Its main scenario was a 15% drop in global dividends this year worth $ 213 billion and the worst drop of 35%.
One focus this week will be the US Treasury Department’s first auction for its 20-year bond on Wednesday. The Treasury Department plans to borrow a record $ 3 trillion this quarter.
So far, the market has easily absorbed the flood of new debt with a 10-year yield, which remains in a narrow range of about 0.64%.
The dollar is also largely tied to the range, and its attractiveness is generally certain. Against a basket of currencies, it was last at 100,330, up 0.7% last week.
The euro was stable at 1.0821 EUR =, while the dollar was stronger against the Japanese yen at 107.19 JPY =.
The pound briefly hit a seven-week low of $ 1.2073 GBP = after the Bank of England’s chief economist said he was looking more urgently for options such as negative interest rates and buying riskier assets to support the economy.
In commodity markets, the flow of liquidity from central banks, combined with record low interest rates, helped lift gold to a seven-year high. The metal last rose 1.3 percent to $ 1,763 an ounce, with silver and palladium also on the roll.
Oil prices rose as demand rose as countries eased travel restrictions, with US oil showing no signs of a drop in prices last month before WTI’s June contract expired on Tuesday.
Brent crude futures rose $ 1.08 to $ 33.58 a barrel, while US commodities rose $ 1.27 to $ 30.70.
Report by Wayne Cole and Sumeet Chatterjee; Edited by Richard Pullin and Sri Navaratnam