NEW YORK (Reuters) – World shares strode to four-month highs on Wednesday as hopes for a coronavirus vaccine offset rising U.S.-China tensions and also helped lift the euro and oil prices on improved sentiment.
Asian markets were choppy after more barbs between Beijing and Washington over Hong Kong, but European bourses rose almost 2% and Wall Street advanced as investors set aside concerns about the growing number of COVID cases.
An experimental vaccine produced by biotech start-up Moderna Inc <MRNA.O> showed it was safe and provoked immune responses in all 45 healthy volunteers, an early- stage trial showed on Tuesday.
A separate University of Oxford trial was also positive news, according to reports on Wednesday.
U.S. Treasury yields rose and the yield curve steepened, indicating a wider spread between long- and short-term interest rates, as the hopes for a vaccine boosted risk appetite and upbeat economic data released on Wednesday added to the optimism.
“The market is trading fairly ‘risk on’ on vaccine hopes,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “It’s largely COVID news driving the price action recently.”
U.S. industrial production, manufacturing output and plant capacity rose more than expected in June, and there was a bigger- than-expected draw in U.S. crude and refined products last week as demand edges up.
For a graphic on Industrial production:
https://graphics.reuters.com/USA-STOCKS/xegpbmddovq/indprod.png
Adding to the enthusiasm, the Federal Reserve’s Beige Book survey showed U.S. businesses saw an uptick in activity into the beginning of July as states eased restrictions to contain the pandemic.
Europe’s broad FTSEurofirst 300 index <.FTEU3> rose 1.65%, as growth-sensitive sectors such as travel and leisure <.SXTP>, miners <.SXPP> and industrial companies <.SXNP> led gains.
Moderna surged to a record high after its experimental drug produced high levels of virus-killing antibodies, bolstering hopes it may prove effective in later stages of testing. Moderna shares rose 6.9%.
Goldman Sachs <GS.N> rose after reporting its trading revenue doubled in the second quarter, driven by big swings in stock and bond markets since March.
On Wall Street, the Dow Jones Industrial Average <.DJI> rose 0.85%, the S&P 500 <.SPX> gained 0.91%, and the Nasdaq Composite <.IXIC> added 0.59%.
Stocks that have benefited from widespread lockdowns, including Amazon.com Inc <AMZN.O> and Zoom Video Communications Inc <ZM.O>, slid, limiting Nasdaq’s gains. Amazon posted losses for a third consecutive session.
Hopes of progress this week toward a deal on the European Union’s 750-billion-euro COVID recovery fund helped sentiment in Europe. The euro traded above $1.1430 <EUR=> for the first time since March, and Italy and Spain’s bond market borrowing costs came down again. [.EU][/FRX][GVD/EUR]
The euro <EUR=> rose 0.13% to $1.1411. The European Central Bank started a two-day meeting, though no major announcement is expected when it concludes on Thursday.
Chinese shares fell 1.3% <.CSI300> and Hong Kong <.HSI> ended flat after President Donald Trump ordered an end to Hong Kong’s special status under U.S. law to punish China for its “oppressive actions” against the former British colony.
China’s Foreign Ministry vowed to retaliate, saying, “Hong Kong affairs are purely China’s internal affairs and no foreign country has the right to interfere.”
Japan’s Nikkei <.N225> and Australia’s benchmark index remained upbeat, finishing up 1.6% and 1.9%, respectively.
For a graphic on Bulls in the China shop:
https://fingfx.thomsonreuters.com/gfx/mkt/xlbvgoaxlvq/Pasted%20image%201594813858864.png
RED ALERT
The dollar was on the defensive, particularly against risk-sensitive currencies, following the news of progress in vaccine development. [/FRX]
Sweden’s crown <SEK=> vaulted to its highest versus the greenback since February 2019 and the risk-sensitive Australian dollar popped to a one-month high at $0.70 <AUD=D4>.
The yen <JPY=> was down 0.27% at $106.9400.
Oil rose on the sharp drop in U.S. inventories, but further gains were limited as the Organization of the Petroleum Exporting Countries and allies were set to ease supply curbs from August as the global economy recovers from the pandemic.
Brent crude <LCOc1> settled up 89 cents at $43.79 a barrel, while U.S. crude <CLc1> rose 91 cents to settle at $41.20 a barrel.
Gold prices held above $1,800 an ounce as the surge in coronavirus cases and renewed U.S.-China tensions bolstered safe-haven demand, but the rally in stocks capped the advance.
U.S. gold futures <GCv1> added 40 cents to settle at$1,813.80. Spot gold <XAU=> rose 0.15% to $1,810.17.
Yields on the 10-year U.S. Treasury note <US10YT=RR> rose 1.9 basis points to 0.6332%.
(Reporting by Marc Jones and Herbert Lash; additional reporting by Karen Brettell in New York; Editing by Steve Orlofsky, Richard Chang and Leslie Adler)
