Stocks rally as reopening, easing China-US tensions beat bad data

HONG KONG (AFP) – Moves to ease lockdown measures and reopen economies around the world fired equity markets yesterday as investors looked past a string of depressing data suggesting the planet is heading for its worst downturn since the Great Depression.

Some of the world’s biggest economies are in contraction, factory production has collapsed, hundreds of millions of jobs have been destroyed and numerous companies have gone to the wall since the pandemic struck earlier in the year.

And some observers are warning of more pain to come.

But traders remain buoyed as mind-boggling stimulus and central bank backstopping measures along with easing China-United States (US) tensions have provided much-needed reassurance.

That combined with signs of a slowdown in the disease in some of the worst-hit nations and governments slowly lifting restrictions that have kept around half the planet under some form of lockdown has fuelled a surge across world markets.

After crashing in the space of a few weeks, global equities are up about 20 per cent since their trough in March, and analysts say the gains could continue.

JP Morgan Chase analysts wrote in a note, “While the collapse in economic activity is historic, so too is the global policy response to cushion the impact and support a recovery.

“We expect risky assets to continue to recover as economies reopen.” They did, however, expect gains to slow down.

Wall Street’s three main indexes all rallied more than one per cent, with the Nasdaq even running into positive territory for 2020, despite data showing new claims for US unemployment benefits hit 3.2 million last week, taking the total to 33.5 million.

And the sentiment seeped into Asia.

Tokyo soared 2.6 percent, while Hong Kong climbed one per cent and Shanghai added 0.8 per cent.

Mumbai piled on more than one per cent, Seoul jumped 0.9 per cent, while Sydney put on 0.5 per cent. There were also gains in Wellington, Bangkok and Jakarta, though Singapore, Manila and Jakarta dipped.

In early trade, Paris was up 0.6 per cent and Frankfurt rose one per cent. London is closed for a holiday.

Eyes are now on the release of US non-farm payrolls, which will provide the most comprehensive accounting of the impact of the crisis on the world’s top economy.

In the face of the widespread gains, David Hunt of PGIM gave a sobering analysis. “We believe the equity markets are substantially overvalued relative to what we think is going on in the real economy,” he told Bloomberg TV.