Stocks gain as earnings eclipse new U.S.-China tensions
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[July 23, 2020]
By Tommy Wilkes
LONDON (Reuters) - European stocks rose on
Thursday as better-than-expected corporate earnings offset worries about
rising cases of COVID-19 and a sharp escalation in tensions between the
United States and China.
Shares rallied to their strongest levels since February this week - in
many countries erasing their entire slump in March when the coronavirus
pandemic sent markets into freefall - as investors bet that massive
stimulus has carried economies through the worst of it.
The pan-region Euro Stoxx 50 climbed 0.42% while the German DAX gained
0.43% and the FTSE 100 by a similar margin.
S&P mini-futures added 0.29%, pointing to a stronger open on Wall
Street.
The MSCI world equity index, which tracks shares in 49 countries, rose
0.2%, close to Tuesday's level, which was its highest since late
February.
The gains came despite Washington's order to Beijing to close its
consulate in Houston, Texas amid accusations against China of spying.
These had weighed on risk sentiment earlier in Asia, initially pulling
shares lower before Asian stocks rebounded.
China said the order was an "unprecedented escalation" by Washington,
and a source said Beijing was considering shutting the U.S. consulate in
Wuhan in retaliation.
U.S. President Donald Trump said that other consulate closures were
"always possible".
"You almost have a tug of war in markets between positives and negatives
and its finally balanced. It looks like markets are pricing a V-shaped
recovery so you can expect small negatives to have an outsize impact on
markets," said Justin Onuekwusi, portfolio manager at Legal & General
Investment Management.
"But the pullback is likely to be shortlived as there are people waiting
for a dip."
Positive corporate earnings surprises in Europe helped the mood,
including from Unilever, French-Italian chipmaker STMicroelectronics and
automaker Daimler.
Investors will be keeping a close watch on U.S. weekly jobless claims
figures due at 1230 GMT for the latest indications of how the novel
coronavirus pandemic has affected the American economy. The U.S.
recorded more than 1,100 new coronavirus deaths for a second straight
day on Wednesday.
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A security guard wearing a face mask stands near the Bund Financial
Bull statue and a display showing an image of a medical worker
following the novel coronavirus disease (COVID-19) outbreak, on The
Bund in Shanghai, China, March 18, 2020. REUTERS/Aly Song/File Photo
Despite the virus being far from under control, analysts say
unprecedented stimulus measures to boost battered economies continue
to provide structural support for riskier assets.
"The forces of liquidity are just unparalleled ... we're seeing what
happened post the GFC (global financial crisis), but we're seeing it
on steroids," said Kay Van-Petersen, global macro strategist at Saxo
Capital Markets in Singapore.
"It's rare that you see both monetary and fiscal policy turned on,
and then when they are they only turn on for a little bit."
GOLD GLITTERS
In currency markets the euro was up 0.1%, close to the 21-month high
of $1.1601 it touched on Wednesday as agreement between European
Union members on a large economic recovery fund continued to provide
lift.
The dollar was down marginally against a basket of currencies and
unchanged versus the Japanese yen.
Gold prices rose 0.3% to $1,876.60 per ounce, a new nine-year peak,
with prices up more than 23% on the year.
Investors have flocked to the safe-haven metal as they seek shelter
from a potential reversal in pumped-up stock prices and a possible
rise in inflation following so much monetary and fiscal stimulus.
Oil prices edged up, with U.S. crude adding 14 cents to $42.04 a
barrel and global benchmark Brent crude up 12 cents to $44.41 per
barrel.
(Additional reporting by Sujata Rao in London and Andrew Galbraith
in Shanghai; Editing by Raissa Kasolowsky)
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