World equities, oil slip, but China rumbles on

Andrew Cummings
July 8, 2020

European shares jumped, with the pan-European STOXX 600 index rising 1.64%.

Oil prices eased in tandem with the pullback in stocks.

A measure of tech shares rose 4.7%, the most since June 1, as the best performer among the CSI 300 Index's 10 industry groups Tuesday.

For some commentators, China's rally could just be a manifestation of a theme already seen in other stock markets this year - the rise of the retail investor. Tesla Inc jumped 13.5%, up 228% so far this year. Even Japan's Nikkei, which has lagged with a soft domestic economy, managed a rise of 1.8%.

US Treasury yields ticked lower as a rising caseload of Covid-19, the respiratory disease caused by the novel coronavirus, raised concerns about economic reopening plans. The index measures how well economic data releases are faring relative to consensus forecasts.

Reports of the "healthy bull market" was displayed in a front-page editorial in the state-owned newspaper China Securities Journal as well as coverage from state broadcaster Xinwen Lianbo on Monday, both of which reflect the official positions of the government.

"We advise against regarding uncertainty as a reason for exiting markets".

"Economic conditions still have a long way to go to get back to pre-crisis levels", Barnes said. "It is very loose and that should mean markets which have underperformed should do well", Darby told Reuters.

The speed of the previous week's gains in China is in several ways unseen considering the fact that the inventory bubble that burst five decades back.

China's moves came as the Sino-U.S. disagreements have gone beyond trade and tariff to include a whole gamut of issues, such as the status of Hong Kong, signalling to some investors that Beijing may be aiming to reduce its dependence on the West.

Analysts estimate that reopenings affecting 40% of the USA population have now been wound back.

"After yesterday's strong risk rally - which also drove risky currencies higher - the reality of regional lockdowns in places like the U.S., UK, Spain and now Australia are a gentle reminder that the threat of a second coronavirus wave is one that investors should not be quick to price out", said Viraj Patel, global FX and macro strategist at Arkera.

"We must remember too that USA and China relations are deteriorating noticeably".

Green shoots in USA data also weakened demand for the safe-haven dollar.

It had no reaction to the country's central bank leaving rates unchanged. The yield on China's 10-year government bonds was last at 3.03%.

The spurt has put the Chinese benchmark well ahead of global peers so far this year - it is up about 10% through Tuesday, versus a 5% decline in the MSCI World.

The dollar index, meanwhile, rose 0.3% to 97.009.

The Australian dollar sank 0.65% to its USA counterpart after the announcement, last trading at $0.6928.

Gold held steady near 8-year peak, changing hands at $1,783.3 per ounce. In the first five days of July, 16 US states reported record increases in new cases of COVID-19, the disease caused by the virus that has infected almost 3 million Americans and killed more than 130,000, according to a Reuters tally.

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