World stocks were just shy of three-month highs and the dollar weakened further on Monday as optimism on economies opening up boosted risk appetite, shrugging off worries over riots in the U.S. and unease over Washington's power struggle with Beijing.
After having risen a whopping 35% from a late March trough, stocks were set to kick off June with more gains. The MSCI all country world stocks index <.MIWD00000PUS> has covered two-thirds of the losses it incurred in the aftermath of the coronavirus outbreak.
Monday's gains were also lifted by relief that while President Donald Trump began the process of ending special U.S. treatment for Hong Kong to punish China, he left their trade deal intact.
European stocks <.STOXX> opened 1% higher led by virus-hit sectors such as travel & leisure, banks and miners but volumes were subdued as Germany, Switzerland and Austria were closed for holidays.
"The Trump rhetoric against China and trade impediments against Hong Kong could have been a lot worse, hence the performance of those markets this morning, which has helped the risk backdrop for the European open," said Chris Bailey, European strategist at wealth manager Raymond James.
The safe-haven dollar <.DXY>, meanwhile, hit an 11-week low dented by risk-on mood among investors and riots in major U.S. cities over race and policing.
"I agree the riots are not good but the perception is that this is a local issue...and the uncertainty has spilled over into a lower dollar," Bailey added.
E-Mini futures for the S&P 500 <ESc1> were trading 0.4% higher, reversing a 1% loss earlier in the session.
In Asia, stocks closed higher led by China on signs parts of the domestic economy were picking up. Hong Kong <.HSI> managed to rally 3.6%, while Chinese blue chips <.CSI300> put on 2.4%.
An official business survey from China showed its factory activity grew at a slower pace in May but momentum in the services and construction sectors quickened.
That helped lift MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> 2.1% to its highest since early March. Japan's Nikkei <.N225> added 0.7% to also reach a three-month peak.
The turmoil was a fresh setback for the economy which was only just emerging from a downturn akin to the Great Depression. Following poor data on spending and trade out on Friday, the Atlanta Federal Reserve estimated economic output could drop a staggering 51% annualised in the second quarter.
The May jobs report due out on Friday is forecast to show the unemployment rate surged to 19.8%, smashing April’s record 14.7%. Payrolls are expected to drop by 7.4 million, on top of the 20.5 million jobs lost the previous month.
YEARS, NOT MONTHS
"Current unemployment numbers go far beyond what has been experienced in any post-war recession," Barclays economist Christian Keller wrote in a note. "To the extent that some sectors may never return to pre-pandemic business-as-usual."
Bond investors suspect economies will need massive amounts of central bank support long after they reopen and that is keeping yields super low even as governments borrow much more.
Yields on U.S. 10-year notes <US10YT=RR> were trading steady at 0.66% having recovered from a blip up to 0.74% last month when the market absorbed a tidal wave of new issuance.
German bund yields <DE10YT=RR> were stuck near minus 0.42%.
In currency markets, the euro continued to lap up gains, the single currency was last up at $1.1131 <EUR=>, after climbing 1.8% last week. The Australian dollar <AUD=D3> hit a four-month high.
Much of the dollar's recent decline has come against the euro which has been broadly boosted by plans for an EU stimulus package.
Markets are awaiting a meeting of the European Central Bank on Thursday where it is widely expected to raise its asset buying by around 500 billion euros to 1.25 trillion.
In commodity markets, gold added 0.9% to $1,1742 an ounce <XAU=>. [GOL/]
Oil prices initially eased on worries about U.S. demand, but found support from reports Russia had no objection to the next meeting of OPEC and its allies being brought forward to June 4 from the following week.
Brent crude <LCOc1> futures were off 22 cents at $37.62 a barrel, while U.S. crude <CLc1> fell 19 cents to $35.30. [O/R]
(Reporting by Thyagaraju Adinarayan in London, additional reporting by Wayne Cole in Sydney, editing by Ed Osmond)
