Daily summary: European stocks rally on lockdown easing hopes

 

During the first session of the new week, stock indexes continue to rise as several countries across the globe continue to ease lockdown measures. Japan ended a nationwide state of emergency, Australian kids went back to class and Italy's Lombardy region reported zero deaths today, while Madrid and Barcelona entered the Phase 1 of the 4-stage of exiting lockdown. Also investors welcomed the fact that Economic Stabilization Fund (WSF) has approved a 9 billion euro ($9.80 billion) stabilization package for Lufthansawhich is  Germany's flagship carrier. "The Executive Board also supports the package", Lufthansa said, adding that the bailout still need consent from shareholders as well as the European Commission. On the economic data front, the Ifo Business Climate indicator rose above expectations in May from a record low hit in April.

For some time, stock markets around the world have been ignoring rising number of new coronavirus cases. Concerns regarding  rising US -China tensions are not able to spoil investor’s moods either.  Over the weekend thousands of people took to Hong Kong streets to protest Beijing's national security law. The US said will add 33 Chinese firms and institutions to an economic blacklist White House National Security Adviser Robert O'Brien said on Sunday that China's latest move could lead to US sanctions. In response the Chinese Foreign Minister Wang Yi said Americans should give up its “wishful thinking” of changing China and warned US actions are pushing the two countries to the brink of a new cold war. 

UK Treasury announced on Sunday it may step in to support crucial businesses on a 'last resort' basis if a viable company exhausts all options and its failure disproportionately harms the economy. In addition, political uncertainty grew as British Prime Minister Boris Johnson was under pressure to fire senior adviser Dominic Cummings following reports that he traveled during a nationwide lockdown in March when his wife was ill with COVID-19 symptoms.

Investor focus will now turn to the EU common recovery plan. Recently Netherlands, Austria, Denmark and Sweden opposed to the Franco-German recovery plan to issue EU debt to help worst affected. countries. Instead, the “frugal four” proposed over the weekend to create an Emergency Recovery Fund financed by loans only. Despite lower volatility German DAX index rose by2.9%, while the French CAC40 added 2.2%. Trading did not take place in the United Kingdom due to the Spring Bank Holiday. US stock futures are trading over 1% higher but the cash markets the NYSE and Nymex are closed today for the Memorial Day holiday.

Oil prices continue to hold gains on the back of the easing of coronavirus restrictions, with the benchmark Brent crude trading above $35 per barrel, near a 2-month high and WTI oil trading above $33.44 per barrel. Indian Oil Minister said that the country regained 65% of its appetite for fuel and demand is expected to reach nearly pre-pandemic levels next month. Meantime, Saudi state news agency SPA reported that Iraq and Saudi Arabia agreed over the weekend to continue working to rebalance oil market and stressed their commitment to production cuts agreed by the OPEC.

Gold fell below $1,730 an ounce on Monday after Nikkei newspaper reported that the Japanese government would approve another stimulus package worth $929 billion, mostly comprising financial aid for companies.

There is not much data scheduled for release tomorrow, therefore indices are likely to be driven by headlines related  to Sino-US relations. US Conference Board Consumer Confidence index and New Home Sales are the key data releases which will be published tomorrow. Besides that investors will also get to know Dallas Fed Manufacturing Index and RBNZ Financial Stability Report. Apart from that BoC's Governor Poloz is scheduled to speech in the evening.