Asian stocks rise as markets pin hopes on global economic recovery
Asian stocks ground out gains overnight as traders chose to focus on the prospects of a global economic recovery from coronavirus over US-China fears.
Japan’s Nikkei jumped 1.3 per cent on Tuesday but Hong Kong’s Hang Seng index rose a comparatively small 0.6 per cent.
President Donald Trump’s threat to bring in the military to end violent protests in US cities left US futures negative in Asia, with the S&P down 0.54 per cent.
Trump’s decision not to resort to more tariffs to curb China’s aggression in Hong Kong yesterday pushed European stock markets higher. The FTSE 100 gained 1.48 per cent while the Cac rose 1.43 per cent.
However, reports China has ordered state-run firms to halt orders of US soybeans – a key tenet of the pair’s trade agreement – has left doubt over the future of a US-China trade deal.
But the S&P 500 still jumped another 0.38 per cent to hit its highest level since the start of the coronavirus pandemic. And the tech-heavy Nasdaq rose 0.66 per cent, leaving it under three per cent off all-time highs achieved in February.
“In spite of what was some generally negative newsflow yesterday, global markets continued to climb as hopes for further economic recovery gathered more momentum,” Deutsche Bank’s Jim Reid said.
“This is a continuation of the rotation out of ‘growth’ stocks and into more ‘value’ oriented securities that we saw last week,” Reid added of the Nasdaq’s rise, citing tech behemoth stocks like Microsoft, Google and Netflix.
But analysts warned fears over progress on a US-China trade deal unravelling could spur a drop in the near term.
“There’s increasing concern about further deterioration in relations between China and the U.S.,” said Michael McCarthy, chief market strategist at CMC Markets told Reuters.
“In the meantime, we’re hanging in there…but I think we might be getting a little exhausted given the giddy heights that we’re trading at.”
They warned economic recoveries must match investors’ bullish moods in order to keep hold of recent gains.
“This optimistic read for risk can only persist if measures like orders and employment continue to improve month to month,” said Alan Ruskin, chief international strategist at Deutsche Bank.
“Early setbacks would be a very poor sign, but are not expected in the period immediately following the end of lockdowns.”