Global equities rebound as investors weigh economy against diplomacy

TOKYO (Reuters) – Global stocks rebounded on Friday as Asian stocks recovered from a three-month low as investors focused more on optimism about the global economic recovery than on rising tensions between the West and China.

European stocks are expected to open higher, with Euro Stoxx futures rising 0.8% and UK FTSE futures gaining 0.61%.

The MSCI ex-Japan Asia index rose 1.43% after hitting a nearly three-month low on Thursday, as the Shanghai Composite Index gained 1.53%, breaking a three-day losing streak.

Chinese stocks fell near a three-month low earlier in the month on Thursday. The European Union joined with Washington allies this week in imposing sanctions on officials in China’s Xinjiang region over allegations of human rights violations, which resulted in retaliatory sanctions from Beijing.

“All the sanctions so far have been largely symbolic and are expected to have little economic impact. But the Sino-US confrontation affects market sentiment. It might take some time before they come to a compromise, ”said Yasutada Suzuki, Head of Emerging Markets Investments at Sumitomo Mitsui Bank.

Japan’s Nikkei rose 1.47% after Wall Street stocks rallied, driven by cheap cyclical stocks that were battered by the pandemic.

The Dow Jones Industrial Average rose 0.62% and the S&P 500 rose 0.52% while the Nasdaq Composite only added 0.12%.

“It’s the end of the month, the end of the quarter and for Japanese players, the end of the financial year, so we are seeing random flows from all kinds of players,” said Masanari Takada, multi-asset strategist. at Nomura Securities.

“But by and large, those who were leading the reflation trade based on their positive outlook on the Chinese economy are now closing their positions while those who couldn’t ride this wave are asking if they should. buy in the event of a dip. “

As markets were pulled more by various quarter-end trades than the news flow, analysts noted that overnight headlines were mostly favorable to equities.

Data from the US Department of Labor showed that jobless claims fell to a year-long low last week, a sign that the US economy is on the verge of stronger growth as the public health situation is improving.

In his first official press conference, US President Joe Biden said he would double his administration’s vaccination rollout plan after hitting the previous target of 100 million shots 42 days ahead of schedule.

But while the improvement in the health crisis in the United States has supported risk appetite globally, investors are increasingly alarmed by a divergence in health conditions.

“Vaccination in continental Europe is behind schedule. Compared to the United States, economic reopenings are likely to be delayed as some countries are forced to impose lockdowns, ”said Soichiro Matsumoto, chief investment officer, Japan, of Credit Suisse’s private banking unit in Tokyo.

This put pressure on the euro, which licked its wounds at $ 1.1782 after dropping to $ 1.1762 overnight, its lowest level since November.

The dollar also rose to 109.21 yen, a striking distance from last week’s nine-month high of 109.365 yen.

The US currency index is near its highest level since mid-November, having gained 2.0% so far this month.

Oil prices rebounded somewhat after falling 4% on Thursday, although they are on track for their third consecutive week of losses, fearing a further reduction in demand. [O/R]

Besides Europe, major developing economies such as Brazil and India are also grappling with a resurgence of COVID-19 cases.

The market has always been supported by concerns over the supply disruption as a container ship stranded in the Suez Canal could block the vital shipping lane for weeks.

US crude was last up 1.33% to $ 59.35 a barrel and Brent was at $ 62.62, up 1.08%.