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Stocks, euro rise on recovery hopes; U.S.-China rift lifts gold

NEW YORK (Reuters) – A gauge of global equity markets climbed on Thursday on optimism for a speedy economic recovery and a massive stimulus plan in Europe helped lift regional stocks and the euro, while gold rebounded on a safety bid on deteriorating U.S.-China relations.

MSCI’s gauge of stocks across the globe rose 0.46% but Wall Street ended lower after a late-session reversal on headlines that President Donald Trump would hold a news conference on Friday about China.

Markets are slowly realizing the escalating tensions between the U.S. and China is not going away and represent headwinds for the global economy, said Ed Moya, senior market analyst at OANDA in New York.

“There’s going to be some push back. No one was anticipating that in the immediate future,” Moya said. “It could derail some of the reopening momentum we’ve had.”

Oil futures rose, reversing earlier losses, on signs U.S. gasoline demand is increasing despite a big surprise build in crude inventories and worries that China’s new security law for Hong Kong could result in demand-dampening trade sanctions.

Gold pared earlier gains of 1% as rising stock markets dulled its safe-haven appeal, but the escalating U.S.-Chinese tensions kept bullion propped up.

China’s parliament approved national security legislation for Hong Kong that democracy activists say could erode the territory’s freedoms and jeopardize its role as a global financial hub.

Investors have largely turned a blind eye to renewed U.S.-China tensions and instead are focused on the reopening of business activity, Candice Bangsund, a global asset allocation portfolio manager at Fiera Capital in Montreal, said earlier in the session.

“Stocks have maintained that positive momentum largely reflecting optimism that growth will recover as COVID lockdowns are eased and economies progressively reopen,” Bangsund said. “Enhanced government stimulus announcements this week out of Europe and Japan have emboldened that risk-on trade.”

The number of Americans seeking jobless benefits fell for an eighth straight week last week, but claims remained astonishingly high.

In Europe, the pan-regional STOXX 600 index rose 1.64% to an 11-week high on the European Union’s plan to prop up the bloc’s coronavirus-hit economies with a 750-billion-euro ($828 billion) recovery fund.

The euro fell 0.04% to $1.1072, a two-month high. The dollar index fell 0.423%.

Stocks on Wall Street closed lower, as early gains in healthcare and technology stocks were overtaken by falling bank and consumer discretionary shares.

The Dow Jones Industrial Average fell 147.63 points, or 0.58%, to 25,400.64. The S&P 500 lost 6.4 points, or 0.21%, to 3,029.73 and the Nasdaq Composite dropped 43.37 points, or 0.46%, to 9,368.99.

Overnight in Asia, markets were subdued after U.S. Secretary of State Mike Pompeo warned Hong Kong no longer warranted special treatment under U.S. law.

MSCI’s broadest index of Asia-Pacific shares outside Japan ended flat. Shares in Hong Kong ended down 0.7% as Chinese shares managed to close in positive territory [.SS], while Japan’s Nikkei jumped 2.3%. [.N][.T]

Euro zone bond yields were stable, with Italian borrowing costs – a key European confidence indicator – edging toward eight-week lows. Safe-haven German bonds sold off slightly.

U.S. government debt yields rose as stocks gained, reducing demand for safe-haven bonds, before the Treasury is due to sell a record $38 billion of seven-year notes.

Benchmark 10-year notes rose 1.5 basis points to yield 0.6966%.

The U.S. Energy Information Administration said crude inventories rose 7.9 million barrels in the latest week, exceeding expectations, due to a big increase in imports. But gasoline stockpiles fell unexpectedly as refiners boosted output. [EIA/S]

U.S. crude futures rose 90 cents to settle at $33.71 a barrel while Brent rose 55 cents to settle at $35.29.

Saudi Arabia and some other OPEC oil producers are considering extending record-high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources.

U.S. gold futures settled up 0.1% at $1,728.30 an ounce.

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Hong Kong tensions rattle world stock markets, oil tumbles

NEW YORK/LONDON (Reuters) – Oil prices tumbled and global equity markets fell on Friday as China’s move to impose a new security law on Hong Kong further strained U.S.-China relations and clouded economic recovery prospects.

China also dropped its annual growth target for the first time, adding to uncertainty about the fallout from the COVID-19 pandemic, boosting safe-haven investments such as U.S. Treasuries US10YT=RR and the dollar.

China said it would impose new national security legislation on Hong Kong, leading President Donald Trump to warn that Washington would react “very strongly” against any attempt to gain more control over the former British colony.

Emerging market shares slid -2.72%. Stocks in Europe closed mostly flat and on Wall Street finished mixed as investors prepared for a long weekend in the United States, the UK and elsewhere.

After trading lower most of the session, Wall Street trended upward in late trading, with the S&P and the Dow managing to finish higher.

“The market just keeps battling higher, it just wants to go higher,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York. “It’s anticipating improvement and we’ve seen all the bad news.”

Tensions between the world’s two largest economies have risen in recent weeks, with Washington ramping up criticism of China over the origins of the coronavirus pandemic, raising fears the rhetoric could crimp economic growth.

The U.S. Commerce Department said late in the session that it is adding 33 Chinese companies and other institutions to a blacklist for human rights violations and to address U.S. national security concerns.

The resurgent U.S.-China standoff weighed on oil prices.

“You have these doubts over China that is triggering this sell-off in oil, and it’s going to gain steam. If oil sells off, it’s hard to have a strong stock market,” said Ed Moya, senior market analyst at OANDA in New York.

Of major asset classes, crude oil has rebounded the most off the year’s lows on hopes world economies will soon recover from coronavirus-induced business shutdowns, he said, adding that he believed oil’s rally was overdone.

“There’s just too much uncertainty, and that’s going to likely keep on weighing on risk appetite,” Moya said.

MSCI’s all-country world stock index .MIWD00000PUS shed 0.40%, but the pan-European STOXX 600 index closed down just 0.3%.

On Wall Street, the Dow Jones Industrial Average .DJI fell 8.96 points, or 0.04%, to 24,465.16. The S&P 500 .SPX gained 6.94 points, or 0.24%, to 2,955.45, and the Nasdaq Composite .IXIC added 39.71 points, or 0.43%, to 9,324.59.

Earlier in Asia, Hong Kong’s Hang Seng index .HSI slid more than 5% to a seven-week low, its biggest daily percentage fall since 2015. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 2.7%; Japan’s Nikkei .N225 fell 0.8%.

Analysts said extensive central bank stimulus continues to underpin sentiment and buoy equity markets.

Japan’s central bank unveiled a lending program to channel nearly $280 billion to small businesses hit by the coronavirus. India slashed rates for a second time this year and the European Central Bank, in the minutes from its last meeting, said it was ready to expand emergency bond purchases as early as June.

U.S. crude CLc1 fell 67 cents to settle at $33.25 a barrel, paring about half earlier losses of more than 5%. Brent LCOc1 settled at $35.13, down 93 cents on the day.

The dollar index =USD rose 0.331%, with the euro EUR= down 0.42% to $1.0903. The Japanese yen JPY= strengthened 0.01% versus the greenback at 107.62 per dollar.

Benchmark 10-year U.S. Treasury yields fell 0.2 basis points to 0.6574% US10YT=RR.

Spot gold XAU= added 0.5% and U.S. gold futures GCv1 settled up 0.8% at $1,735.50 an ounce.

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Equities slide, bonds rise, on Fed warning of prolonged recession

NEW YORK (Reuters) – Stock markets tumbled on Wednesday as fears about a second wave of coronavirus infections and warnings from Federal Reserve Chairman Jerome Powell that the U.S. faces a “significantly worse” recession than any since World War II weighed on investor sentiment and boosted safe-haven bonds.

Powell’s comments come as parts of the global economy are starting to reopen following a deep freeze aimed at curbing the spread of the virus that has pushed unemployment rates to their highest since the Great Depression. Benchmark equity indexes are up 25% or more since their March lows in anticipation of further government stimulus programs to help the global economy recover.

“Earnings season is largely behind us and we have entered the phase two of COVID-19 as de-confinement of economies begins, and that is creating a lot of uncertainties on a daily basis, which is weighing on markets,” said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

“We don’t think this is the start of a new correction. Markets went too far, too fast and this is the consolidation.”

MSCI’s gauge of stocks across the globe shed 1.53% following broad losses in Europe and Asia.

In midday trading on Wall Street, the Dow Jones Industrial Average fell 491.31 points, or 2.07%, to 23,273.47, the S&P 500 lost 51.55 points, or 1.80%, to 2,818.57 and the Nasdaq Composite dropped 139.32 points, or 1.55%, to 8,863.23.

Leading U.S. infectious disease expert Anthony Fauci on Tuesday warned lawmakers that a premature lifting of lockdowns could lead to additional outbreaks of the deadly coronavirus, which has killed 80,000 Americans and brought the economy to its knees.

“We now have to see how this reopening plays out and there are a lot of risks to reopening,” said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.

The mood was further soured by proposed legislation by a leading U.S. Republican senator that would authorize President Donald Trump to impose sanctions on China if it fails to give a full account of events leading to the coronavirus outbreak.

Safe-haven assets rose as investors positioned for an extended economic downturn. Benchmark 10-year notes last rose 17/32 in price to yield 0.6379%, from 0.692% late on Tuesday.

Oil markets, which have plummeted this year due to a combination of a collapse in demand and a supply glut, regained some ground on expectations of deeper production cuts.

U.S. crude recently fell 0.89% to $25.55 per barrel and Brent was at $29.65, down 1.1% on the day.

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Global equities edge higher on oil rebound, stimulus hopes

NEW YORK (Reuters) – Global equity benchmarks edged higher Thursday as investors weighed an ongoing rebound in oil prices against stark economic data from Europe and the United States that further illustrated the worldwide toll from the coronavirus pandemic.

IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI) the European Union, seen as a good gauge of economic health, sank to by far its lowest reading since the survey began in mid-1998. In the UK, PMIs fell to a new record low in March – and far below even the weakest forecast in a Reuters poll of economists.

U.S. jobless claims, meanwhile, fell to 4.427 million, a decline from 5.2 million the week before but still about 200,000 more than expected. A record 26 million Americans have sought unemployment benefits over the last five weeks.

“While markets are going to take this drop as being very positive, it is not a victory flag that recession is going to be avoided,” said Steven Blitz, chief U.S. economist at TS Lombard in New York.

MSCI’s gauge of stocks across the globe gained 0.74%.following modest gains in Europe and Asia.

In early trading on Wall Street, the Dow Jones Industrial Average rose 165.87 points, or 0.71%, to 23,641.69, the S&P 500 gained 22.3 points, or 0.80%, to 2,821.61 and the Nasdaq Composite added 66.73 points, or 0.79%, to 8,562.11.

Safe-haven assets like the dollar and government bonds were little changed. Benchmark 10-year notes last rose 1/32 in price to yield 0.6172%, from 0.619% late on Wednesday.

An internal EU note showed the bloc’s commission was considering a plan worth 2 trillion euros ($2.2 trillion) to tackle a deep recession. An EU meeting to discuss the plan comes a day after the U.S. Congress appeared to be on course to approve nearly $500 billion more in coronavirus aid, taking the world’s biggest economy’s overall stimulus packages to nearly $3 trillion.

“(The) EU Council meeting will be closely watched to see how quickly EU policy-makers will move towards area-wide fiscal risk-sharing,” said George Cole, an economist at Goldman Sachs. “We expect the discussions to fall short of a full commitment to mutualize risks from the COVID-19 shock.”

The prospects of further stimulus measures and increasing tensions between the United States and Iran helped bolster oil prices. U.S. crude recently rose 21.19% to $16.70 per barrel and Brent was at $22.09, up 8.44% on the day.

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Global stocks edge lower on economic toll from coronavirus, oil rallies

NEW YORK (Reuters) – Global stock markets sank on Friday following more signs that the COVID-19 pandemic would take a massive toll on economic growth, while oil prices continued to rally on hopes of a cut to global supply.

Investors sought safe havens in the U.S. dollar and government bonds, pushing U.S. Treasury yields near their lowest in three weeks.

U.S. payrolls fell by the largest amount in March since March 2009, ending a record 113 straight months of job growth. Morgan Stanley said the U.S. economy will shrink 5.5% in 2020, the steepest drop since 1946, with a 38% contraction predicted for the second quarter.

Oil prices recorded their biggest weekly gain in five weeks after U.S. President Donald Trump said on Thursday he had brokered a deal that could result in Russia and Saudi Arabia cutting oil output by an unprecedented 10 million to 15 million barrels per day (bpd), representing 10-15% of global supply. Trump said he had not offered to cut U.S. output.

In Europe, a number of firms flagged a hit to business from the pandemic caused by the new coronavirus, foreshadowing a deeper earnings recession ahead of the reporting season. [.EU]

MSCI’s gauge of stocks across the globe shed 1.39% following broad declines in Europe and Asia.

At the close of trading on Wall Street, the Dow Jones Industrial Average fell 360.91 points, or 1.69%, to 21,052.53, the S&P 500 lost 38.25 points, or 1.51%, to 2,488.65 and the Nasdaq Composite dropped 114.23 points, or 1.53%, to 7,373.08.

“Global recession fears are now being confirmed by the incoming economic prints,” said Han Tan, market analyst at FXTM. “Until the virus case count peaks and the business earnings outlook improves, risk sentiment may only experience fleeting bouts of positivity.”

The pandemic has claimed more than 53,000 deaths as it further exploded in the United States and the death toll climbed in Spain and Italy, according to a Reuters tally. [nL8N2BR2TX]

Concerns about the extent of the damage to the global economy pushed investors into the perceived safety of government bonds. Benchmark 10-year notes last rose 6/32 in price to yield 0.6072%, from 0.627% late on Thursday.

“You have to take into consideration this isn’t the full impact just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, adding that he expects “further erosion in the job market in the months ahead.”

Brent crude futures gained 15% to $34.43, extending Thursday’s record 24.7% surge, while U.S. West Texas Intermediate (WTI) crude rose 12.28% to $28.43. [O/R]

Saudi Arabia said it would call an emergency meeting of the Organization of the Petroleum Exporting Countries (OPEC), state media reported.

In early March, talks over production cuts between Russia and Saudi Arabia collapsed, leading them to start a price war that has pushed oil prices to their lowest levels in nearly two decades.

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Goldman Sachs sees 1% drop in global GDP due to 'coronacrisis'

LONDON (Reuters) – Goldman Sachs said it expected global real gross domestic product to contract by about 1% in 2020, a sharper economic decline than in the year following the 2008 global financial crisis.

Global governments have been taking unprecedented measures to contain the coronavirus outbreak which is threatening to spark a worldwide economic contraction.

“The coronacrisis — or more precisely, the response to that crisis — represents a physical (as opposed to financial) constraint on economic activity that is unprecedented in postwar history,” the investment bank said in a note to its clients published late on Sunday.

It sees the real GDP in advanced economies contracting “very sharply” in the second quarter, including a 24% drop in the United States, a whopping two-and-a-half times as large as the previous postwar record.

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Goldman downgrades U.S. growth forecast for first and second quarter due to coronavirus

NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) has downgraded its U.S. growth forecast for the first and second quarters in the wake of the economic fallout from the coronavirus outbreak.

In a note sent on Sunday, the U.S. bank said it now sees real gross domestic product growth of 0% in the first three months of the year, from its original estimate of 0.7% expansion. For the second quarter, it sees U.S. growth contracting to -0.5% from its initial forecast of 0%.

Goldman raised its third-quarter U.S. GDP estimate to 3% from 1% originally.

“We expect U.S. economic activity to contract sharply in the remainder of March and throughout April as virus fears lead consumers and businesses to continue to cut back on spending such as travel, entertainment, and restaurant meals,” Goldman said in its latest research note.

Apart from the impact on consumer spending, Goldman said it also revised its growth forecasts as significant supply chain disruptions have grown.

That said, the U.S. bank expects economic activity to recover after April, with strong growth in the second half.

But that expectation, Goldman pointed out, depends on certain factors, such as the extent to which social distancing, or avoiding crowds or gatherings, as well as seasonally higher temperatures will reduce infections as well as whether good treatments will emerge.

Goldman therefore expects higher growth for the fourth quarter of 4%, from its initial estimate of 2.25%, and sees further strong gains in early 2021.

Overall its GDP forecast for 2020 was down to 0.4% from 1.2% originally.

“The uncertainty around all of these numbers is much greater than normal,” the bank said.

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