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Stocks climb on new signs of economic recovery

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Stocks rose on the first trading day of the third quarter as new signs that China’s economy is recovering from the coronavirus pandemic outweighed concerns of further outbreaks in the US.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks climbed 1.5 per cent on Wednesday, while Australia’s S&P/ASX 200 and South Korea’s Kospi both added 0.4 per cent.

Hong Kong’s stock market was closed for a public holiday, a day after Beijing passed a law tightening its grip on the semi-autonomous territory.

The gains followed further evidence that the world’s second-biggest economy is building momentum after largely containing the health crisis. The Caixin manufacturing purchasing managers’ index — a measure of factory activity in China — came in at 51.2 for June, marking its second straight month of growth.

That result “reflected manufacturers’ confidence that there would be a further relaxation of epidemic controls and a normalisation of economic activities”, said Wang Zhe, senior economist at Caixin Insight Group.

Futures trading suggested the S&P 500 would open 0.3 per cent lower when US trading begins later in the day. London’s FTSE 100 was tipped to fall 0.2 per cent.

Overnight, the S&P 500 closed 1.5 per cent higher while the tech-heavy Nasdaq rose 1.9 per cent. That capped off US stocks’ best quarter in more than two decades on the back of a broad rally sparked by hefty central bank support measures and hopes of a powerful economic recovery from the health crisis.

However, a senior medical official said that daily new US coronavirus cases could more than double as western and southern states struggle to get outbreaks under control.

Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, warned the US Senate on Tuesday that the country was “going in the wrong direction” on the pandemic.

“We’re now having 40-plus thousand new cases a day. I would not be surprised if we go up to 100,000 a day if this does not turn around,” Dr Fauci told a Senate hearing. “I am very concerned because it could get very bad.”

In addition to fears over the spread of Covid-19, geopolitical tensions have also come to the fore. Beijing on Tuesday drew swift condemnation from the US, Europe and Australia after it passed a controversial security law for Hong Kong, an important global finance hub.

Japanese shares lagged the rest of the Asia-Pacific region, with the benchmark Topix slipping 0.9 per cent after a central bank survey showed manufacturing sentiment fell to its lowest level since 2009 in June.

The yen, often viewed by investors as a haven asset during times of uncertainty, added 0.3 per cent to ¥107.65 per US dollar.

With coronavirus infections outside of Tokyo remaining low, however, Japan’s “economy should bounce back in the second half of the year”, said Tom Learmouth, an economist at Capital Economics.

Oil prices rose, with West Texas Intermediate, the US benchmark, gaining 1 per cent to $39.69 per barrel. Brent, the international marker, was 0.8 per cent higher at $41.60 per barrel.

Crude was boosted by a bigger than expected drawdown in US inventories, which could suggest that demand is rising as the economy begins to recover.

The yield on US 10-year Treasuries rose 0.02 percentage point to 0.674 per cent.

https://www.ft.com/content/1aa67fd2-b516-406b-9876-ec4e1c7f7fdf
https://www.ft.com/content/1aa67fd2-b516-406b-9876-ec4e1c7f7fdf

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