Asian stocks reach three month highs and stay resilient to U.S Rioting troubles
Shares in Asia pushed to three-month highs as progress on opening up economies helped with worries over riots across and unease over Washington’s power struggle with Beijing.
There was also some light relief that even though Donald Trump began the process of ending Hong Kong’s special trading arrangement ( a measure put in place to punish China) that their trade agreement is still intact.
Asian markets were led higher after a cautious start by China, on signs parts of the domestic economy were picking up. Hong Kong, HSI managed to rally 3.6%, while Chinese blue chips, CSI300 put on 2.2% and Japan’s Nikkei N225 added 1.1% to also reach a 3-month peak.
The troubles in the U.S are a fresh setback for their economy which is only just emerging from a downturn similar to the Great Depression. Following poor data on spending and trade out on Friday, the Atlanta Federal Reserve estimated economic output could drop a staggering 51% annualised in the second quarter.
The May jobs report due out on Friday is forecast to show the unemployment rate surged to 19.8%, smashing April’s record 14.7%. Payrolls are expected to drop by 7.4 million, on top of the 20.5 million jobs lost the previous month.
“Current unemployment numbers go far beyond what has been experienced in any post-war recession, To the extent that some sectors may never return to pre-pandemic business-as-usual, labour faces a substantial challenge to reallocate workers,” a Barclays economist wrote in a note “Such a process could be a matter of years rather than months or quarters and in the meantime, it would weigh on consumer demand,” they added.
Bond investors suspect economies will need massive amounts of central bank support long after they reopen and that is keeping yields super-low even as governments borrow much more.
Yields on U.S. 10-year notes US10YT=RR were trading steady at 0.66% having recovered from a blip up to 0.74% last month when the market absorbed a tidal wave of new issuance.
The decline in U.S. yields has been a burden for the dollar, but the world’s reserve currency also tends to benefit from safe-haven status to limit the losses.
Early Monday, the dollar was 0.2% softer on a basket of peers at 98.018 =USD having touched an 11-week low of 97.944 on Friday. It was steadier on the yen at 107.70 JPY
Much of the dollar’s recent decline has come against the euro which has been broadly boosted by plans for an EU stimulus package. The single currency was last up to at $1.1131 EUR, after climbing 1.8% last week.
Markets are awaiting a meeting of the European Central Bank on Thursday where it is widely expected to raise its asset-buying by around 500 billion euros to 1.25 trillion.
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