World stocks and oil prices have surged, hopes for a rapid global economic recovery from the coronavirus pandemic and continued support from central banks have helped offset increased geopolitical risks.
On Wednesday, at the start of the session in Asia-Pacific, the Japanese benchmark Topix rose 0.6%, the Hang Seng in Hong Kong by 1.2% and the Kospi in South Korea by 2.5%. Oil rose above $ 40 for the first time in almost three months thanks to the optimism of crude producers who will prolong production cuts.
This follows a solid performance on Wall Street, where the S&P 500 closed up 0.8% to a three-month high. US actions have increased, despite massive protests in cities across the country after the police massacre of an unarmed African American man and mounting tensions between Beijing and Washington.
Investors also looked into the possibility of additional economic support measures at the European Central Bank meeting later this week.
“Compared to past market downturns in recessions, the speed and magnitude of this rebound is unusual,” said Kerry Craig, global market strategist at JPMorgan. “The difference here is the huge incentives from governments and central banks.”
Elsewhere in Asia, the Chinese CSI 300 index of stocks listed in Shanghai and Shenzhen rose 0.5% after the Caixin purchasing managers’ index showed that activity in the services sector had increased for the first time. times in four months in May. New orders jumped at the fastest pace in a decade, indicating a robust recovery in parts of the world’s second largest economy after its Covid-19 epidemic.
Signs that Australia is on the right track for its first technical recession in three decades have dampened recent enthusiasm for the Australian dollar. Growing optimism about the country’s economic recovery helped push the currency to a five-month high of $ 0.68983 against its US counterpart on Wednesday morning.
However, the Australian dollar reduced gains after official data showed that gross domestic product fell 0.3% quarter-over-quarter in the first three months of the year, as the Coronavirus crisis had hit the economy. Economists predict the pandemic will end the country’s 29-year cycle without a recession, with Canberra predicting the economy could contract by as much as 10% in the second quarter.
Oil prices were buoyed by hopes that the Opec + countries would extend production cuts by a month. Crude oil Brent, the international benchmark, rose 1.5% to $ 40.17 a barrel and returned above $ 40 for the first time since the alliance of oil-producing countries dissolved in a price war in March. US marker West Texas Intermediate climbed 2.3% to $ 37.64.
“The market was already ready to move from surplus to deficit as we enter the second half of this year, so prices are expected to strengthen over the rest of the year,” said Warren Patterson, head of raw materials strategy at ING. “Clearly, even deeper cuts will speed up the process of rebalancing the market. “
Futures markets tilted further gains for global stocks with the S&P 500 expected to increase 0.3% and the FTSE 100 is expected to gain 0.9% when the two markets open later on Wednesday.