Global stocks advanced as encouraging reports from vaccine trials plus hopes of further stimulus for pandemic-hit economies tipped the balance for investors.

US stocks extended gains for a second day as the S&P 500 index rose 1.1 per cent at the opening bell on Wall Street. In Europe, equities accelerated an early advance, with the continent-wide Stoxx 600 adding 1.6 per cent to be on track for a third increase in four days. The UK benchmark FTSE 100 climbed 1.8 per cent.

Reports on progress towards an Oxford Covid-19 vaccine added to the upbeat sentiment that was fuelled by news from Moderna. Shares in the US biotech group surged 8 per cent in early trading. The company said on Tuesday its experimental vaccine had produced an immune response in a small, early-stage trial.

Jim Reid, analyst at Deutsche Bank, said the Moderna announcement had raised “hopes that the vaccine may be within sight”, despite noting the significant side-effects experienced by some patients in the study. 

Goldman Sachs defied the coronavirus crisis with the US investment bank reported a boom in bond trading to earn as much in the second quarter of 2020 as it did a year earlier. The quarterly earnings season kicked off on Tuesday with three major US banks detailing the $28bn they set aside to cover future loan losses from the pandemic.

In the US, investors appeared to have largely priced in the grim picture for corporate profits, which are expected to fall by the most since 2008.

“The focus is more on what the companies can say in terms of forward guidance,” said Kasper Elmgreen, head of equities at fund manager Amundi. “They are navigating a ship with very low forward visibility and a very wide range of outcomes.”

Conditions in the New York manufacturing industry improved this month at their best pace since November 18. Businesses, though, had a less optimistic outlook than in June.

Chinese stocks proved an exception after US president Donald Trump signed legislation rescinding Hong Kong’s special trade privileges with America and clearing the way for sanctions on Chinese officials.

“Investors are taking comfort in the fact that [Mr] Trump has an election to win in November and needs to support growth domestically,” said Charlotte Harington, a portfolio manager at Fidelity, “which should constrain how hard he is on China in the short term”.

The ratcheting up of US-China tensions sent the CSI 300 index of Shanghai and Shenzhen-listed stocks down 1.3 per cent, while Hong Kong’s Hang Seng ended the session flat. Still, the Chinese index is hovering close to a five-year record after an eight-day winning streak this month.

Louis Tse, managing director at VC Brokerage, noted that investors had been expecting Mr Trump to sign the legislation for several weeks and that the news “was more or less discounted”. However, the mood in the market dimmed as Beijing vowed to retaliate.

Offshore investors again dumped their holdings of Chinese shares via stock market link-ups between Hong Kong and mainland bourses on Wednesday. At less than $400m, though, net sales came nowhere close to Tuesday’s record $2.5bn sell-off.

Japan’s benchmark Topix index was up 1.6 per cent while Australia’s S&P/ASX 200 rose 1.9 per cent.

Meanwhile, Lael Brainard, a governor at the US Federal Reserve, spoke out on Tuesday in favour of doing more to boost the economy. The promise of more support for the market has helped counter growing concerns over a resurgence of coronavirus infections.

Oil prices pulled back from their early gains. A June report from Opec showed the oil-producing group’s output had fallen almost 2m barrels from a month ago.

Brent crude, the international benchmark, bounced back in early afternoon trade, after briefly reversing a more than 1 per cent rise. It was recently 0.7 per cent higher at $43.19 a barrel while West Texas Intermediate, the US marker, rose by a similar percentage to $40.56.

“The outlook is one of inventories drawing and is supportive of oil prices,” said Fidelity’s Ms Harington. “We don’t see Brent going back down to low $30s but if oil prices get too high we will get a shale response from the US.”

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