Asian markets rally on recovery hopes, despite virus surge

Agence France-Presse

Posted at Jul 06 2020 04:39 PM

Men wearing protective face masks, following the coronavirus disease (COVID-19) outbreak, walk past a stock quotation board outside a brokerage in Tokyo, Japan, June 15, 2020. Kim Kyung-Hoon, Reuters

HONG KONG - Asian markets rallied out of the blocks Monday, with further signs of economic recovery continuing to resonate with investors more than a surge in coronavirus infections across the planet.

The easing of lockdowns is providing hope the global economy will bounce back from an expected recession this year, with England's pubs reopening at the weekend and tourist attractions around Europe either now open or planning to.

Better-than-forecast data on US jobs creation and factory activity have also provided a boost to confidence, as are hopes for a vaccine, which observers say is key to kickstarting any recovery.

Traders have piled back into stocks in a major way in recent months -- with the help of vast government and central bank support -- with analysts suggesting the gains are also being helped by a fear of missing out on the rally.

"The global economic data and positive coverage on potential COVID-19 vaccines and treatments represent a... whirligig of positive news that is overwhelming gnarly headline flows around the daily virus case counts in the US," said AxiCorp's Stephen Innes. 

Shanghai led the gains, soaring more than five percent, while Hong Kong was up 3.8 percent to sit at highs not seen since early March.

Jeffrey Halley at OANDA said: "Hong Kong concerns are fading as fast as they began, as the new China-imposed security laws allow money to talk without the annoying interference of protestors."

But he added that the "story still has more to run in a geopolitical context," pointing out that Donald Trump was still to sign a bill censuring Chinese officials linked to the law, which would likely lead to retaliation by Beijing. 

"The scale of those measures will dictate whether geopolitics will have more to say on global financial markets," he said in a note. 

Tokyo piled on 1.8 percent, while Singapore, Seoul, Taipei and Mumbai were all more than one percent higher, with Wellington and Jakarta also up.

London, Paris and Frankfurt all soared almost two percent at the open.

Curbs reimposed 

But there remains trepidation on trading floors as new infections spike around the world.

Some US states are reporting record daily increases, with a number of officials considering reimposing lockdown measures, while Brazil and India are also seeing worryingly large rises.

And Australia said it would effectively seal off the state of Victoria from the rest of the country as authorities struggle to control a surge in cases.

For the first time since the global pandemic began, the border between Australia's two most populous states -- Victoria and New South Wales -- will be shuttered, beginning midnight Tuesday, officials from both states said.

The outbreak sent Sydney falling 0.7 percent.

Spain, South Africa, Japan and the Philippines are among several other countries to seen an uptick in new virus cases.

"For now the positive data surprises and huge fiscal and monetary stimulus are the overwhelming forces," National Australia Bank's Rodrigo Catril said in a note.

"But the increase in COVID-19 infections, not just in the US, means that they need to be closely monitored -- the introduction of more severe containment measures has the potential to derail the positive vibes in markets."

Shane Oliver, at AMP Capital Investors, said the recovery would likely be slower than the "Deep V" rebound that many are hoping for.

"Trends in new coronavirus cases along with pressure on medical systems will continue to be watched closely, particularly in US states," he said.