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Global equities gain support from US stimulus optimism

Democrats, Republicans battle to finalise new package to help economy recover


AFP August 05, 2020
LONDON:

Stock markets recovered from early weakness on Tuesday as optimism about a fresh US economic stimulus package crept back into trading rooms.

Democrats and Republicans are battling to hammer out a new package to help the US economy recover from the ravages of the pandemic, with analysts pointing to reports claiming good progress had been made.

“There’s a big desire from both parties to get some kind of stimulus passed. I think the market is expecting that,” said Bob Phillips, at Spectrum Management Group. The dollar weakened on expectations of more money being injected into the economy.

Adding to optimism about a recovery, already fuelled by upbeat data in recent days, were forecast-beating US factory order numbers published on Tuesday. Europe’s stock markets ended the session mostly higher, the main exception being Frankfurt, having clawed back earlier losses.

On Wall Street, the Dow had added over 100 points by the end of the New York morning, after reversing a weaker opening trend.

“US stocks are tacking onto yesterday’s strong start to August,” said analysts at Charles Schwab. “Monday’s plethora of upbeat global manufacturing reports is being followed by today’s stronger-than-expected June US factory orders data, while Friday’s July non-farm payroll report looms,” they said.

Earlier on Tuesday, Asian stocks had rallied on the back of Wall Street’s strong overnight performance which saw the Nasdaq establish a new record high. There was some relief in markets that “on the virus front, encouraging signs are emerging as many hotspots are seeing slow improvements”, noted Edward Moya at OANDA.

“New cases and hospitalisations are declining in most second wave states, but this will need to improve more strongly for optimism to grow,” he said. Whatever desire there was to take new risks with stocks was being held in check by uncertainty, including about the shape of any economic recovery, analysts said.

“The composition of China’s economic recovery offers a roadmap to the rest of the world that is not especially bullish for a consumer-driven rebound,” said AxiCorp’s Stephen Innes.

“It’s easier to normalise the supply-side of the economy than the demand side in a post-pandemic-shock environment.”

Published in The Express Tribune, August 5th, 2020.

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