Global shares rally as economies slowly get started again

London — Global shares rallied on Friday as investors cheered signs of improving Sino-American relations and looked towards more governments gradually restarting their economies.

The positive mood stands in sharp contrast to the economic data. US unemployment numbers due later on Friday are expected to be the worst in a lifetime as the coronavirus pandemic ravages economies.

Top US and Chinese trade representatives discussed their phase one trade deal on Friday, with China saying they agreed to improve the atmosphere for its implementation and the US saying both sides expected obligations to be met.

Asian markets, which had opened higher following gains on Wall Street, were lifted by news of a phone call between US and China trade representatives.

This calmed investors’ fears about renewed trade tensions after US President Donald Trump and other top officials blamed China for the deaths of hundreds of thousands from Covid-19 and threatened punitive action, including possible tariffs and shifting supply chains away from China.

“The threat of a breakdown in negotiations, for now at least, has been averted, though of course the president continues to persist with some of his comments regarding the Covid outbreak, but at least from the trade side it looks as though the participants involved have dialled down the temperature a little bit,” said Jeremy Stretch, head of G10 forex strategy at CIBC Capital Markets.

Improving sentiment also put European futures comfortably in the black, with the pan-European Stoxx 600 up 0.6% at 339.86 points, Germany’s DAX 30 up 0.75% at 10,840 and France’s CAC 40 0.6% higher at 4,526.

US stock futures for the S&P 500 were up 0.92% to 2,906.

The MSCI world equity index, which tracks shares in 49 countries, was 0.5% higher, while MSCI’s main European Index was up 0.64%.

The Euro Stoxx 600 was 0.6% higher, helped by the construction and materials sector.

Oil prices climbed as countries, including Australia, moved ahead with plans to relax economic and social lockdowns put in place to halt the virus, kindling market hopes for a boost in demand for crude and its products.

Brent crude was up 77c, or 2.6%, at $30.23 a barrel, while US oil gained $1.06, or 4.5%, to $24.61 a barrel. Both contracts are heading for a second week of gains after the lows of April.

Core European bond yields were little changed, and the spread between German and Italian 10-year government bonds narrowed by 6 basis points.

Historic hit

Unemployment data due later in the day is expected to show a historic hit to the US labour market.

Forecasters expect the US economy likely lost a staggering 22-million jobs in April, in what would be the steepest plunge in payrolls since the Great Depression and the starkest sign yet of how the pandemic is battering the world’s top economy.

“The situation on the US labour market is a disaster — that is no secret,” wrote Commerzbank strategist Thu Lan Nguyen in a note to clients. “And today everyone’s attention is going to focus on the labour market report for April to find out just how bad the disaster is.”

The dollar slipped against a basket of six major currencies in early trading as investors defied the broader sense of doom. By early European trading, the dollar was edging up again, suggesting the optimism would not endure.

A public holiday in Britain means liquidity will be thin as London markets are closed.

Gold hovered near a two-week high hit in the previous session as investors awaited the US jobs report, with spot gold holding just below the highest since April 27.

Reuters