World stocks rise after Fed chief optimistic about recovery

BEIJING (AP) — Global stock markets and United States (US) futures rose yesterday after the chief American central banker expressed optimism the American economy might start to recover this year from the coronavirus pandemic.

London and Frankfurt opened higher, while benchmarks in Shanghai, Tokyo, Hong Kong and Australia advanced.

That came despite Japan’s announcement that its economy contracted in the first quarter and the Trump administration’s decision to step up a technology conflict with Beijing by tightening restrictions on Chinese tech giant Huawei.

Investors appear to be looking past the outbreak to a recovery despite rising infection numbers in the US, Brazil and some other countries. Forecasters warn the latest market buoyancy might be premature and a return to normal could be some way off.

Market sentiment “will likely remain fragile” as investors weigh government stimulus plans against rising US-Chinese tension and poor economic data, said Riki Ogawa of Mizuho Bank in a report.

In early trading, the FTSE 100 in London gained 2.1 per cent to 5,922.41 and the DAX in Frankfurt advanced 2.8 per cent to 10,762.09. France’s CAC 40 rose 2.5 per cent to 4,383.44.

A currency trader works near the screens showing the Korea Composite Stock Price Index (KOSPI) and the foreign exchange rate between the US dollar and the South Korean won at the foreign exchange dealing room in Seoul, South Korea yesterday. PHOTO: AP

In Asia, the Shanghai Composite Index rose 0.2 per cent to 2,875.42 and Tokyo’s Nikkei 225 gained 0.5 per cent to 20,133.73. The Hang Seng in Hong Kong advanced 0.6 per cent to 23,934.77. The Kospi in Seoul was 0.5 per cent higher at 1,937.11 and Australia’s S&P-ASX 200 gained one per cent to 5,460.50. India’s Sensex lost 2.6 per cent to 30,310.56. Markets in New Zealand and Southeast Asia advanced.

On Wall Street, futures for the S&P 500 index and the Dow industrials were up 1.6 per cent.

Last Friday, US stocks turned in their biggest weekly loss in nearly two months.

The S&P 500 index rose 11.20 points to 2,863.70. It ended down 2.3 per cent for the week. The Dow Jones Industrial Average gained 0.3 per cent while the Nasdaq composite added 0.8 per cent.

Federal Reserve Chair Jerome Powell expressed optimism last Sunday the US economy can begin to rebound in the second half, assuming the coronavirus doesn’t erupt in a second wave. He said a full recovery won’t likely be possible before the arrival of a vaccine.

That appeared to encourage investors who are looking for signs of when global economies might return to normal.

In an interview with CBS’s 60 Minutes, Powell said the US economy was fundamentally healthy before the virus forced widespread business shutdowns and tens of millions of layoffs. Once the outbreak has been contained, he said, the economy should be able to rebound “substantially.” The US downturn was the result of an external event instead of problems such as the financial instabilities that led to the 2008 crisis, which may mean “we can get back to a healthy economy fairly quickly,” Powell said.

Powell and Treasury Secretary Steven Mnuchin are due to appear on Thursday before a Senate panel to report on recovery efforts.

“Expect policymakers to strike a more cautious tone, emphasising that we are not out of the woods yet and that more will be more stimulus in the offing,” Stephen Innes of AxiCorp said in a report.

Meanwhile, Japan’s government reported yesterday the world’s third-largest economy contracted by 0.9 per cent in the three months ending in March compared with the previous quarter.

That “sharp fall” suggests there is “much worse to come” in the current quarter, Tom Learmouth of Capital Economics said in a report.

Meanwhile, the White House added to trade uncertainty by tightening restrictions on Huawei Technologies Ltd. American officials say Huawei, one of the biggest makers of smartphones and network equipment, is a security risk, which the company denies.

Washington said non-US companies that make processor chips for Huawei must obtain permission to use American technology, a move that threatens to disrupt sales. Huawei warned earlier that additional US sanctions on the company might trigger Chinese government retaliation against American enterprises.

In energy markets, benchmark US crude gained USD1.46 to USD30.98 per barrel in electronic trading on the New York Mercantile Exchange.

The contract rose USD1.87 to USD29.43 on Friday. Brent crude, used to price international oils, advanced USD1.30 to USD33.80 per barrel in London. It rose USD1.37 the previous session to USD32.50.

The dollar gained to JPY107.24 from last Friday’s JPY107.08. The euro declined to USD1.0816 from USD1.0828.