Asian equities build on rally as US jobs data fans recovery hopes

HONG KONG (AFP) – A blockbuster United States (US) jobs report that fanned optimism about the economic recovery from the coronavirus crisis helped push Asian stock markets even higher yesterday, while a decision to extend production cuts provided fresh support to oil prices.

As countries continue to ease lockdown measures and with trillions of dollars in stimulus and central bank support pledged, equities across the planet have surged since hitting a trough in March.

And the release of data on Friday showing a staggering 2.5 million US jobs were created in May – compared with an expected loss of more than eight million – added to the optimism, pushing the Nasdaq and the S&P 500 on Wall Street to within spitting distance of record highs.

Canada also reported a surprise increase in employment, confounding forecasts for a big drop.

“While there are still significant uncertainties over the COVID-19 impact on corporate earnings, investors are encouraged by the re-opening of economies that is likely to lead to a rebound in profitability later this year,” said Iyad Abu Hweij of Allied Investment Partners PJSC.

A pedestrian walks past an electronic quotation board displaying share prices of the Tokyo Stock Exchange. PHOTO: AFP

Tokyo rose more than one per cent, while Wellington surged more than three per cent after New Zealand officials reported no active cases of COVID-19 for the first time since the pandemic began and said the country was free of the disease, adding that restrictions would be lifted.

Hong Kong and Seoul each added 0.1 per cent, Shanghai closed up 0.2 per cent, while Mumbai, and Singapore jumped more than one per cent, with Jakarta three per cent higher.

Bangkok and Manila were also higher but in early trade, London, Paris and Frankfurt dropped on profit-taking after surging on Friday. Sydney was closed for a holiday.

“In a year of almost unmitigated disaster, the May jobs report was a pleasant surprise,” said David Kelly of JP Morgan Asset Management.

Jason Wong at BNZ markets added, “The data are consistent with activity indicators that show a recovery in activity as US lockdowns eased, following the big hole in the economy in April, and give increased confidence that activity is on a clear path upward from here as restrictions have eased further.”

As Latin America experiences a spike in infections and deaths, Europe continues to reopen to some semblance of normality, providing a much-needed boost to the shattered tourism industry.

Adding to the positive sentiment was news that major oil producers had agreed to extend output cuts of almost 10 million barrels a day for another month through to the end of July.

The deal, which had been expected, provided further support to crude prices, which have surged over the past two months thanks to the cuts and the easing of lockdowns that has boosted demand.

The agreement “is hugely positive for sentiment as the presumption is this clampdown will accelerate the rebalancing of supply and demand”, said AxiCorp’s Stephen Innes.

“The recognition that the deep cuts need to continue for a month or perhaps longer shows that despite the recent surge in oil prices, the large producers remain worried about the fragile state of the oil markets.”