World markets near a two-week high as Trump leaves hospital
Renewed hopes of US stimulus also helped push shares higher ahead of the ECB and US Fed chiefs to speak later in the day
London — World stock markets neared a more than two-week high on Tuesday after US President Donald Trump’s return to the White House from hospital where he was treated for Covid-19, and expectations of a new US stimulus package being agreed rose.
Europe saw a stuttering start with London’s FTSE dipping and not much traction from France, Italy or Germany, despite a “remarkable” jump in German industrial orders.
Wall Street and most of Asia rallied overnight after Trump’s return from the Walter Reed Medical Centre military hospital outside Washington eased nerves about possible disruption to next month’s presidential election.
Gold, bonds and the dollar suffered losses amid the modestly improved risk appetite, though Wall Street futures had slipped into the red and oil was losing its strong overnight momentum.
“The market is slightly short of oomph,” said Société Générale’s Kit Juckes, pointing to Europe’s subdued start. “It has not managed to get a meaningful lift from [Trump leaving hospital] and I think it is threatening to take a time out and wait for what comes next.”
Trump returned to the White House on Monday after a three-night hospital stay and said he felt “real good”, though one of his doctors cautioned that he may not be out of the woods until later in the week.
MSCI’s broadest index of Asia-Pacific shares had risen 0.7% to a two-and-a-half-week high, with Hong Kong climbing 0.8% and Japan’s Nikkei adding 0.5%. China’s markets remained closed for a public holiday.
US stimulus hopes were still bubbling in the background after US House speaker Nancy Pelosi and US treasury secretary Steven Mnuchin spoke by phone for about an hour and said they were preparing to talk again on Tuesday.
“If we do see some form of stimulus coming through, I think the market will take it in a positive light,” said JP Morgan Asset Management’s chief Asia market strategist Tai Hui.
S&P 500 futures were a touch weaker after the best daily gain on the S&P 500 index in a month overnight, while the optimism hit gold and other safe-haven assets.
Spot gold fell 0.1% to $1,911 an ounce, after hitting a two-week peak on Monday, and US gold futures were down 0.21%.
Bond markets also joined in, as a sharp sell-off in US bonds on Monday carried over into Asia and Europe.
Benchmark 10-year German government bond yields, which move inversely to price, hit their highest in more than a week. Japanese government bond futures fell to a one-month low in the steepest drop in more than five weeks, but South Korean yields jumped.
However, analysts said selling in other Asian markets was more subdued than in the US market because regional investors are beginning to price in a victory for Democratic presidential candidate Joe Biden in the November 3 election.
European Central Bank president Christine Lagarde and US Federal Reserve chief Jerome Powell were also scheduled to speak later in the day, giving traders extra reason for patience.
“The sell-off in US yields is more driven by Trump getting out of hospital,” said DBS rates strategist Duncan Tan in Singapore. “That narrows some of the uncertainties around the election process. In the short term, at the very least, it removes the tail risk of having to consider if Trump or Biden is unable to participate in the election.”
US 10-year yields were steady at 0.77% while in the currency markets, the dollar was under pressure from most other majors with the exception of the safe-haven yen. The dollar gained on the yen to reach ¥105.62, not far short of its highest levels in three weeks.
The Australian dollar gained briefly after the Reserve Bank of Australia left rates on hold, as expected, but later fell back, and the potential for further monetary easing capped gains.
Oil jumped more than 5% overnight and edged higher still in Asia, supported by the Trump news and a supply squeeze as a strike shut six Norwegian offshore oil and gas fields. US crude last stood at $39.15 a barrel, up 0.2% and, Brent crude rose 0.1% to $41.35.
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