Aug 11, 2020

News | Business | Markets: Global shares rally as investors bet on new stimulus

Harry Dempsey & Hudson Lockett  

Shares across Europe and the Asia-Pacific region rose as investors pinned their hopes on Washington pushing through more support measures to limit the economic damage from the coronavirus crisis.
The continental benchmark Stoxx 600 gained 1.7 per cent on Tuesday morning. London’s FTSE 100 mirrored those gains, even after data showed that the UK has shed 730,000 jobs since the start of the outbreak.
Japan’s benchmark Topix index added 2.5 per cent on Tuesday as traders in Tokyo returned from a long weekend. Hong Kong’s Hang Seng index climbed 1.7 per cent while China’s CSI 300 of Shanghai- and Shenzhen-listed shares reversed gains to fall 0.4 per cent.
Wall Street’s S&P 500 was set to notch up a 0.5 per cent gain when trading begins later in the day, after the US index came within 1 per cent of its intraday all-time high on Monday.
Investors are hopeful that US lawmakers would overcome gridlock in Congress to pass a support package that could cushion the economic blow from Covid-19.
“Faith in the recovery and further fiscal stimulus is already being tested in the United States,” said strategists at DWS, the asset management arm of Deutsche Bank. “Given that these are also voters and that elections are looming, we would expect an agreement to be reached eventually.”
President Donald Trump said on Monday that his administration was “seriously” considering a capital gains tax cut, after negotiations to extend fiscal stimulus hit a roadblock.
Dave Ramsden, deputy governor at the Bank of England, reassured in an interview with the Times that the central bank would step up quantitative easing if the economy showed signs of slowing down.
Klaus Baader, global chief economist at Société Générale, said that a strong economic recovery, hopes of further stimulus and the renewed reduction in interest rates are powering equities higher in August.
“The contraction in GDP has been quite a bit smaller than many had expected or feared,” he said, as the OECD revised on Tuesday forecasts for South Korea’s economic contraction in 2020 to be a less worse than expected 0.8 per cent. He added that the global economic recovery was on course to record a “truncated V-shaped”.
Chinese technology shares steadied after two days of sharp losses. The Trump administration last week unveiled executive orders targeting social media apps TikTok and WeChat. The Hong Kong-listed shares of Tencent, the owner of WeChat, rose 1.8 per cent while ecommerce group Alibaba was almost flat.
Shares in Next Digital, the Hong Kong media group controlled by Jimmy Lai, rose 300 per cent on Tuesday, to HK$1.02, taking total gains this week to more than 1,000 per cent.
The company, which owns the pro-democracy newspaper Apple Daily, has rocketed higher amid calls by activists to buy shares in a show of solidarity following Mr Lai's arrest on Monday for allegedly breaching the city's controversial national security law.
However, rising US-China tensions have reined in gains in global markets this week, as Beijing sanctioned 11 US citizens on Monday.
Oil prices were higher, with the International Energy Agency set to make its forecasts on US oil production later on Tuesday. Brent crude, the international benchmark, rose 0.7 per cent to $45.32 a barrel. US marker West Texas Intermediate climbed 1 per cent to $42.35 a barrel.
The US dollar shed 0.2 per cent, while gold slipped 1.9 per cent to below $2,000 per troy ounce. The precious metal is down about 3 per cent since hitting an all-time high on August 7.

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