Global stocks and oil prices jumped as hopes for a swift global economic recovery from the coronavirus pandemic and further central bank support helped offset rising geopolitical risks.

In early Asia-Pacific trading on Wednesday, Japan’s benchmark Topix index rose 0.9 per cent, Hong Kong’s Hang Seng added 1.3 per cent and South Korea’s Kospi rallied 2.5 per cent. Oil climbed back above $40 for the first time in almost three months on optimism crude producers will extend output cuts.

That followed a strong showing on Wall Street, where the S&P 500 closed up 0.8 per cent at a three-month high. US stocks have forged higher despite mass protests in cities across the country after the police slaying of an unarmed African-American man and rising tensions between Beijing and Washington.

Investors were also focusing on the possibility of additional economic support measures when the European Central Bank meets later this week.

Elsewhere in Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks climbed 0.7 per cent after the Caixin purchasing managers’ index showed that services sector activity rose for the first time in four months in May. New orders jumped at the fastest pace in a decade, indicating a robust recovery in certain parts of the world’s second-largest economy following its Covid-19 outbreak.

Signs that Australia is on course for its first technical recession in three decades damped recent enthusiasm for the Australian dollar. Growing optimism over the country’s economic recovery had helped push the currency to a five-month high of $0.6983 against its US counterpart on Wednesday morning.

However, the Australian dollar pared gains after official data showed gross domestic product shrank 0.3 per cent quarter-on-quarter in the first three months of the year as the coronavirus crisis hit the economy. Economists expect the pandemic will end the country’s run of 29 years without a recession, with Canberra forecasting the economy could contract by as much as 10 per cent in the second quarter.

Oil prices were buoyed by hopes that Opec+ nations would extend production cuts for another month. Brent crude, the international benchmark, rose 1.8 per cent to $40.23 a barrel and back above $40 for the first time since the alliance of oil-producing nations dissolved into a price war in March. US marker West Texas Intermediate climbed 2.4 per cent to $37.68.

“The market was already set to transition from surplus to deficit as we move into the second half of this year, and so prices were set to strengthen over the remainder of the year,” said Warren Patterson, head of commodities strategy at ING. “Clearly, even deeper cuts will speed up the process of rebalancing the market.”

Futures markets tipped further gains for global stocks with the S&P 500 set to rise 0.3 per cent and the FTSE 100 expected to gain 0.8 per cent when both markets open later on Wednesday.

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