Daily Outlook

Oil and European shares rise as lockdowns ease; gold jumps

European stock markets rose on Monday and oil prices climbed to their highest in as much as two months as a loosening of coronavirus shutdowns boosted market sentiment, even though the deadly outbreak has yet to be fully contained.

Warm weather enticed much of the world to emerge from coronavirus lockdowns as centres of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

However, the weekend also saw anti-lockdown protesters in countries such as the United States, Germany, England and Poland arguing government restrictions demolish personal liberties and are wrecking economies.

The pan-European STOXX 600 was up 2% at 1020 GMT, with heavyweight bourses in Britainб Germany and France all comfortably in positive territory, recovering some of last week’s losses.

Governments must balance the economic incentive to re-open businesses with the risk of triggering a deadly second wave of the virus, which has killed more than 312,000 people and spread to at least 210 countries since December.

Deutsche Bank strategist Jim Reid said, “It does feel like we’re in the middle of a phoney war at the moment with all of us waiting to see how efficiently the various economies are able to re-open given all the social distancing that will be required.”

There were still lots of obstacles to a rapid recovery, with Federal Reserve Chairman Jerome Powell saying in an interview on Sunday that a U.S. economic recovery may stretch deep into 2021.

The most important data for the U.S. economy now are the “medical metrics” around the coronavirus pandemic, he said.

Health ministers from around the world, including China and the U.S., are expected to call for an independent evaluation of the World Health Organization’s handling of the COVID-19 pandemic during a WHO meeting on Monday.

Already rocky U.S.-China relations also saw tensions increase over the weekend, as the United States raised threats over telecoms equipment giant Huawei Technologies HWT.UL and China’s treatment of journalists in Hong Kong.

U.S. lawmakers and officials are crafting proposals to push American companies to move operations or key suppliers out of China, including tax breaks, new rules, and carefully structured subsidies.

Brent crude reached as much as $34.35 a barrel on Monday, its highest since April 9, and was last up 5.3% at $34.22. U.S. West Texas Intermediate crude was up 7.1% at $31.51 a barrel – a two-month high.

In commodity markets, the flood of liquidity from central banks, combined with record-low interest rates and poor economic data from the U.S., lifted gold to a seven-year peak. The metal was last up 1.3% at $1,763 an ounce, with silver and palladium also boosted.

The MSCI world equity index, which tracks shares in 49 countries, was up around 0.4% while MSCI’s main European Index was up 2%. Government bond yields edged higher across the euro area, while France’s bonds saw some underperformance after its ratings outlook was lowered by Fitch Ratings.

The dollar fell slightly against a basket of six major currencies in early London trading before recovering somewhat, last down less than 0.1% since New York’s close.

Oil and European shares rise as lockdowns ease; gold jumps, Reuters, May 18

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