Global stocks rise after positive US economy data

Global stocks gained ground as hopes for an economic recovery in the US and a potential coronavirus vaccine offset concerns over a surge of infections in several American states.

Tokyo’s benchmark Topix rose 0.5 per cent on Thursday while Australia’s S&P/ASX 200 added 1.1 per cent and South Korea’s Kospi climbed 0.8 per cent. China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks rose 0.7 per cent.

Hong Kong’s Hang Seng index jumped 1.5 per cent as traders returned from a public holiday and a day after Beijing imposed a sweeping national security law on the Asian financial hub.

Overnight, Wall Street’s S&P 500 closed 0.5 per cent higher as investors were boosted by improving economic data and news of a potential coronavirus vaccine from German company BioNTech. The ADP employment report showed US private payrolls rose by 2.37m in June while a gauge of manufacturing activity rebounded to its highest level in 14 months. 

“The latest slew of US data reinforces our view that the global economic recovery is on track despite the occasional setbacks from recurring outbreaks of Covid-19,” analysts at UBS wrote.

On Wednesday, minutes from the Federal Open Market Committee meeting held on June 9 and 10 revealed a growing consensus that the US central bank should “further clarify” its monetary policy intentions. That suggested Fed officials were moving closer to offering detailed guidance on the path of interest rates and asset purchases.

However, the minutes showed that officials were still debating the benefits of so-called yield curve control.

Futures markets tipped the S&P 500 to open flat when trading begins later in the day. Investors will be focused on US non-farm payrolls data slated for release on Thursday, with economists surveyed by Bloomberg forecasting that more than 3m jobs were added in June. That would mark the first rise since the coronavirus pandemic began spurring massive waves of unemployment.

Global equities have also been bolstered this week by growing hopes that renewed outbreaks in the US can be contained, despite daily virus cases jumping by more than 50,000 for the first time on Wednesday.

Lewis Alexander, chief US economist at Nomura, warned of “rising uncertainty and risks ahead due to the rolling wave of Covid-19 cases in the US”, as well as the possible exhaustion of many loans meant to keep American businesses afloat during the pandemic.

Coronavirus is not the only concern for global investors. China’s move to impose national security legislation on semi-automous Hong Kong — which has drawn international condemnation — also risks a new flare-up in geopolitical tensions.

However, “financial markets overall appeared to have digested both the [national security law] and related international responses after their initial reactions”, said Adrienne Lui, an economist at Citi.

Oil prices edged down following gains on Wednesday. Brent crude, the international benchmark, dropped 0.2 per cent to $41.96 a barrel, while US marker West Texas Intermediate was little changed at $39.84.

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