HONG KONG: Growing optimism about the global economic recovery pushed Asian markets higher for a third day on Wednesday as investors took heart from a further easing of lockdowns and looked past China-US tensions and civil unrest across America.
The upbeat mood, and hopes for an extension to a massive output cut agreement, helped oil markets continue their rally, with Brent breaking the $40 mark for the first time in three months.
While deaths and infections surge in Latin America, governments in Europe and Asia have become confident enough to lift containment measures that have likely sunk the world economy into recession and destroyed tens of millions of jobs.
Cafes, bars, pools, beaches and schools are cautiously reopening, fanning hopes the second half of the year will see a sharp economic rebound, which — combined with trillions of dollars in stimulus and central bank support — have fed an equity rally.
“If I look at the markets, I see a V-shaped recovery,” Mark Mobius, co-founder of Mobius Capital Partners, told Bloomberg TV. “That’s what the markets are telling us.” In early trade, Hong Kong, Tokyo and Sydney were up at least one percent, while Singapore was more than two percent higher.
Seoul soared more than two percent as South Korea’s government unveiled a supplementary budget worth $29 billion, while there were also big gains in Wellington, Taipei, Jakarta and Manila.
The gains tracked a rally across European markets and Wall Street, where dealers for now are looking past anti-racism protests in major US cities that have led Donald Trump to call for the military to be deployed.
More fuel for oil rally
“For now the good virus news… (is) more than outweighing the bad news,” said National Australia Bank.
However, it warned that there remained a lot of risk that could spark a massive sell-off.
“On this score is worth noting that southern US states are still showing a steady increase in infections, Hong Kong extended virus-prevention measures after a new cluster of cases and Tokyo’s infections have also spiked,” the commentary said.
“If these trends continue we could see the re-introduction of more severe restrictions.”
The head of the World Bank David Malpass was also concerned about the outlook, saying estimates that anti-virus measures would wipe out $5 trillion are likely to fall far short of the actual damage.
Oil prices added to gains on hopes that major producers will meet to extend their output cuts by one month to August, while investors were also cheered by signs of a further drop in US stockpiles indicating demand is improving.
“The most bullish outcome for oil from the meeting is no sign of squabbling between Russia and Saudi Arabia,” whose price war earlier this year helped send prices crashing.
“Headlines suggest they are on the same page on supply, and that’s bullish for oil in the context of an improving demand backdrop.”
The long-running advance in crude is also providing support to energy-linked currencies, with the Australian dollar up more than one percent, while other higher-yielding, riskier units were also enjoying buying. South Korea’s won and the New Zealand dollar were all well up.(AFP/ APP)