Stocks Turned Bullish on Monday. What Caused the Rally?

 Stock markets traded in the green on Monday. Global stocks surged forward due to hopes of a Covid-19 vaccine breakthrough this year. However, Chinese GDP data was weaker than analysts expected, dampening the mood.

On Friday, pharmaceutical giant Pfizer stated that it would seek emergency use authorization from regulators in the United States soon after the third week of November if it would get positive results from trials.

Even though Chinese GDP figures disappointed investors, news about possible vaccine bolstered most Asian stocks overnight. MSCI’s index of Asia-Pacific stocks, excluding Japan, surged forward by 0.5%, reaching its highest point since May 2018.

Meanwhile, Japan’s Nikkei (^N225) also soared by 1.1%, and the Hong Kong Hang Seng (^HSI) climbed up by 0.6%.

European stocks also joined to the rally this morning, after already gaining on Friday from a string of strong corporate earnings. As a result, the FTSE 100 (^FTSE) jumped by 0.6%, while Germany’s DAX (^GDAXI) increased by 0.8%, and France’s CAC 40 (^FCHI) added 1%.

However, the FTSE tumbled down by 0.3% by the afternoon due to concerns over tightening Covid-19 restrictions in the U.K., including a two-week lockdown in Wales and hindering the Brexit trade deal talks. Furthermore, the Dax edged lower by 0.1% this afternoon, and the CAC climbed up by only 0.3%.

How did the U.S. stocks fare?

U.S. futures looked set for gains later in the day, trading on the bullish territory. The Dow Jones futures (YM=F) and S&P 500 futures (ES=F) were pointing to a 0.9% increase at the open. Meanwhile, Nasdaq futures (NQ=F) surged forward by 1.1%.

According to Deutsche Bank analysts, fresh stimulus hopes were boosting U.S. stocks, along with the optimistic sentiment regarding the new vaccine.

On Sunday, U.S. President Donald Trump stated that he wanted a bigger stimulus package than even House Speaker Nancy Pelosi. Furthermore, Trump also suggested that he was confident of getting Republicans on board. On the other hand, Pelosi announced that she was optimistic a plan could be signed off before the election in November.

At the same time, Chinese stocks took a hit overnight after third-quarter GDP data came in below expectations. GDP was up by 4.9% versus 5.5% growth forecast analysts predicted. The Shanghai Composite (000001.SS) tumbled down by 0.7%.

Nonetheless, Chinese data for the month of September alone was better than expected. According to reports, retail sales jumped by 3.3% year-on-year, more than twice the expansion predicted by experts. Industrial output also skyrocketed by 6.9% versus 5.4% expectations.