LONDON (Reuters) – World shares headed for a one-month high and oil and metal markets rallied on Thursday, as hopes for more U.S. and global stimulus offset Europe’s rising numbers of coronavirus cases and lockdowns.
The pan-European STOXX 600 index was up 0.7% and Wall Street looked set for a similarly strong start as tweets from U.S. President Donald Trump that stimlus talks were back on ensured the bulls kept control.
Expectations that he and House Speaker Nancy Pelosi could agree aid for airlines even if not bigger plans came as jobless claims remained stubbornly high. The dollar was also in the doldrums after the minutes of the Federal Reserve’s last meeting showed backing for more support if required.
“We are still basically tracking risk appetite” said Ned Rumpeltin, the European head of currency strategy at TD Securities, pointing to the steady rise in stock markets as investors bide their time until the U.S. election. “I wonder how long that can last.”
The euro and European government bond markets barely budged as the European Central Bank’s latest meeting accounts argued for a “free hand” to fight the current economic damage albeit keeping a “steady hand” for now.
There wasn’t much movement in dollar-yen either as the pair hovered at 106 yen per greenback. The New Zealand dollar was the liveliest among G10 currencies, dropping as much as half a percent after central bank officials again said they could introduce negative interest rates, though it had mostly recovered ahead of U.S. trading.
It wasn’t all so actionless however. MSCI’s Emerging Market currency index was at a one-month high thanks to decent gains for the Korean won, Mexican peso, Israeli shekel, Pakistani rupee and Hungarian forint, though Turkey’s battered lira fell to another record low.
The Turkish central bank is expected to support the lira, but doubts persist about how much it can do. It has already burnt through most of its reserves new data showed and the country is involved in increasing numbers of geopolitical skirmishes.
(Graphic: Stocks versus COVID – )
In commodities, oil rose above $42 a barrel, supported by output shutdowns in the U.S. Gulf of Mexico and the prospect of more supply losses in Norway, as well as by hopes for some U.S. coronavirus relief aid.
Oil and gas workers have withdrawn from offshore U.S. Gulf production facilities as Hurricane Delta was forecast to intensify into a Category 3 storm. Nearly 1.5 million barrels of daily output was halted.
Brent crude rose 59 cents, or 1.4%, to $42.58 a barrel, after falling 1.6% on Wednesday. U.S. West Texas Intermediate added 45 cents, or 1.1%, to $40.40 after falling 1.8%.
“If Delta stays weak, the oil rally could quickly run out of steam,” said Jeffrey Halley, analyst at brokerage OANDA.
Gold had shaken off some weakness in Asia and was last up 0.2% at $1,886 per ounce, leaving it nearly 25% higher for the year.
Wall Street’s main indexes were set to rise for a second straight day as bets of a piecemeal fiscal stimulus deal lifted sentiment, even though data on weekly jobless claims showed the labor market recovery continued to sputter.
Two days after calling off negotiations on a comprehensive fiscal aid bill, U.S. President Donald Trump said some discussions were ongoing with Democrats about boosting support for U.S. airlines and providing Americans with $1,200 stimulus checks.
Shares of Delta Air Lines, American Airlines, United Airlines and JetBlue jumped between 1.9% and 2.3% in premarket trading.
“The market is really dependent upon (fiscal) stimulus and trying to predict what that’ll likely be,” said Tim Chubb, chief investment officer at Girard in West Chester, Pennsylvania.
“It is also getting a better understanding of how the election will turn out and what that means for the amount of fiscal stimulus.”
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