Wall Street was close to turning positive for the year on Monday, as the unexpected rise in employment in the US on Friday continued to power the remarkable rally in global stocks.
The S&P 500 rose as much as 0.5 per cent in morning trading, building on gains that accelerated with data revealing that 2.5m people had returned to work in the US last month.
The Nasdaq Composite drifted between gains and losses, having briefly touched a new intraday high of 9,847.16, while the Dow Jones Industrial Average gained 0.9 per cent thanks largely to Boeing, whose airline customers are restoring more flights.
Wall Street stocks have now climbed more than 40 per cent from a mid-March low and the S&P 500 is within 1 per cent of erasing its losses for the year. The rebound has come in spite of the economic hit from the coronavirus pandemic and civil unrest in the US triggered by the killing of George Floyd.
“What is clearly happening is the excitement of reopening is allowing a lot of these companies that have been casualties of Covid to come back and come back in force,” said Stanley Druckenmiller, a former hedge fund manager, in an interview on CNBC.
Support by the US Federal Reserve has also helped to alleviate the economic strain. The central bank has slashed interest rates to zero, launched an unlimited bond-buying programme and announced 11 lending facilities.
“I would also say I underestimated how many red lines, and how far, the Fed would go,” added Mr Druckenmiller.
European stocks failed to build on recent gains at the end of a quiet session on Monday, as a historic 18 per cent contraction in German industrial output in May undermined some investors’ confidence that there would be a swift recovery from the pandemic.
“At least for German industry, the period after the imminent rebound does not look too promising,” said Carsten Brzeski, chief economist for the eurozone at ING.
“Contrary to the financial crisis, and the important role of Asian countries in the swift recovery of German industry back then, there is currently no saviour in sight to quickly boost external demand,” he added.
Yields on German Bunds — the benchmark for the eurozone — were steady at around their highest level in two months after rising last week as investors sold haven assets following the European Central Bank’s announcement of further support measures to tackle the pandemic.
Frankfurt’s Xetra Dax equity benchmark fell 0.2 per cent, a decline matched by London’s FTSE 100, which slipped back from a three-month high. The continent-wide Euro Stoxx 600 fell 0.3 per cent.
After a near-40 per cent drop from late February to mid-March, European stocks had rebounded strongly and stood less than 10 per cent lower for the year.
European travel stocks continued to push higher, with the sector up 0.7 per cent on Monday and almost 80 per cent up from the March lows. But travel shares still remained deeply depressed compared with pre-crisis levels.
In the Asia-Pacific region, Japan’s benchmark Topix rose 1.1 per cent while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks added 0.5 per cent. Hong Kong’s Hang Seng was little changed.
Official Chinese data over the weekend showed that exports shrank 3.3 per cent in May in dollar terms, significantly less than the contraction forecast by economists. But imports fell more than anticipated due to weak local demand, raising questions over the pace of the country’s economic recovery from the virus.
In Japan, economic figures published on Monday showed that the world’s third-largest economy shrank at an annualised rate of 2.2 per cent in the first quarter of 2020, compared with initial estimates of a 3.4 per cent decline.
Oil prices fell after Saudi Arabia said that the extension of Opec+ production cuts until the end of July would not include voluntary curbs by a trio of Gulf producers. Brent crude was down 2.8 per cent at $41.12 a barrel while US marker West Texas Intermediate slipped 3.1 per cent to $38.33 per barrel.
Additional reporting by Robin Harding in Tokyo
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June 08, 2020 at 11:26PM
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European stocks steady after sharp fall in German industrial output - Financial Times
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