Stocks rally as better economic data trump second wave fears

HONG KONG (AFP) – Stock markets rose in Asia yesterday as traders welcomed positive economic data from China and the United States (US), which helped offset a pick-up in virus infections and the reimposition of containment measures in some countries.

The easing of lockdowns in recent months has been a key catalyst for world equities as investors – supported by a wall of government and central bank cash – bet on a sharp recovery from what is expected to be a global recession this year.

Wall Street provided a healthy lead, helped by news of a record 44-per cent on-month jump in US pending home sales in June, as well as a massive improvement in manufacturing activity as reported by the Dallas Federal Reserve.

Yesterday, China said its purchasing managers index (PMI) of factory activity improved on May and beat forecasts, while the non-manufacturing reading was also better than hoped.

The readings from the world’s top two economies provided some much-needed hope to investors that a rebound is stirring, helped by the reopening of businesses around the world, led by Europe.

A man wearing a face mask walks past a bank’s electronic board showing the Hong Kong share index at Hong Kong Stock Exchange. PHOTO: AP

Fed boss Jerome Powell lifted the mood with comments on the economic recovery as he said consumer spending had seen a big jump in May and the US economy had “entered an important new phase sooner than expected”, though he warned the recovery was dependent on keeping the virus in check.

Tokyo, Sydney, Wellington, Manila and Bangkok were all more than one per cent higher, while Shanghai added 0.8 per cent and Hong Kong gained 0.5 per cent. There were also healthy gains in Singapore, Mumbai and Taipei.

In early trade, London dipped as officials reimposed lockdown measures in the city of Leicester, while data showed the UK economy shrank more than first thought in the first quarter. Paris and Frankfurt edged higher.

“Worries about second-wave states appear now to be last week’s news, so it seems, as investors turn focus to the robust reopening narrative,” said AxiCorp’s Stephen Innes.

However, there remains a lot of uncertainty on trading floors owing to a spike in new cases in the US, which has led to the reclosure of bars in Los Angeles and the reimposition of measures to fight the disease elsewhere.

Germany, while pressing ahead with easing moves, has also been forced to lock down some districts, while there are also strict measures in place in parts of Beijing and Victoria state in Australia.

And World Health Organization Director General Tedros Adhanom Ghebreyesus pressed home the long fight ahead for the world, saying “the hard reality is this is not even close to being over”, adding that “although many countries have made some progress, globally the pandemic is actually speeding up”.

In Hong Kong, traders were keeping an eye on today’s anniversary of the handover to China, as Beijing passed a security law banning subversion, secession and terrorism.

On Monday, the White House ended sensitive defence exports to Hong Kong, while the Commerce Department simultaneously said it was revoking its special status for Hong Kong. It will now treat the financial hub the same as China for so-called dual-use exports that have both military and civilian applications – and which are highly restricted when sought by Beijing.

The move led China to say it would take “countermeasures”.