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Global Stocks Optimistic, Economies Open

Global stocks hovered near three-month highs and the dollar remained flat on Monday. Optimism over economies beginning to open up again boosted risk appetite. This is despite worries over riots in the United States and unease over Washington’s standoff with Beijing.

Stocks looked set to kick off June with more gains, having risen a whopping 35% from a late March trough. Global stocks looked set to kick off June with more gains. 

The MSCI world stocks index has recovered two-thirds of the losses it incurred after the coronavirus outbreak.

Investors of stocks were also relieved that President Donald Trump left the trade deal with China intact. This is despite moving to end Washington’s special treatment for Hong Kong. Specifically, this refers to their retaliation against Beijing seeking to impose new security legislation on the city.

China has asked state-owned firms to halt purchases of soybeans and pork from the U.S. This was following Washington’s move over to Hong Kong.

In Europe, the stock market was up 0.8%, led by virus-hit sectors: travel & leisure, banks, and miners. But volumes were subdued as Switzerland, Austria, and Germany were closed for holidays.

The Trump rhetoric against China and trade impediments against Hong Kong could have been worse. Hence, this morning’s market performance has helped the risk backdrop for the European open. This was according to Chris Bailey, a European strategist at wealth manager Raymond James.

Global Stocks in Asia 

Global stocks closed higher in Asia, led by China, on signs that parts of their domestic economy were picking up. Hong Kong rallied by 3.4%, while Chinese blue chips put on 2.7%.

An official business survey from China showed its factory activity slowed down in May. But momentum in the services and construction sectors went on a faster pace.

Japan’s Nikkei gained 0.8% to reach a three-month peak.

In stock trading, E-Mini futures for the S&P 500 traded 0.2% lower due to simmering U.S.-China tensions.

Meanwhile, the safe-haven dollar hit an 11-week low, dented by a risk-on mood among investors. Riots in major U.S. cities over race and policing also weighed on the currency.

Bailey said he agrees the riots are not good, but the perception is that this is a local issue. The uncertainty spilled over, resulting in a lower dollar. 

The turmoil in the U.S. was a fresh setback for the economy. It was only just emerging from a downturn akin to the Great Depression. 

The Atlanta Federal Reserve estimated that economic output could drop by a staggering 51% annualized in the Q2. This followed negative data on spending and trade out on Friday.

The May jobs report, due out on Friday, is forecast to show the unemployment rate surging to 19.8%. This would smash April’s record of 14.7%. Payrolls should drop by 7.4 million, on top of the 20.5 million jobs lost the previous month.

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