Share markets rose on Monday as stronger industrial activity in China offered signs it was recovering from the coronavirus pandemic that outweighed jitters over U.S.-Sino trade tensions.
The Euro STOXX 600 rose 0.4% and London’s FTSE .FTSE 0.5%. European oil and gas shares .SXEP were up 1.1% as rising oil prices added reasons for riskier bets.
Shares in BP (BP.L) and Royal Dutch Shell (RDSa.L) rose 2.6% and 1.5% respectively after Saudi Aramco (2222.SE) raised optimism about a growth in Asian demand and Iraq pledged to further cut supply. [O/R]
Deflation at China’s factories eased in July, data showed, driven by a rise in global energy prices and as industrial activity climbed back towards pre-coronavirus levels.
Industrial output in China is returning to levels seen before the pandemic paralysed huge swathes of the economy, driven by pent-up demand, government stimulus and surprisingly resilient exports.
That bodes well for the global recovery from the coronavirus pandemic, market players said.
“China is so much in advance in this process of lockdowns and exiting lockdown, that any good signs for the Chinese economy is essential (for the world economy),” said Florian Ielpo, head of macroeconomic research at Unigestion.
The MSCI world equity index .MIWD00000PUS, which tracks shares in 49 countries, was flat. Wall Street futures gauges ESc1 pointed to slim gains.
But advances were checked by tension between the United States and China ahead of scheduled trade talks at the weekend to review the agreement signed in January.
Underscoring concerns, European tech shares .SX8P lost 0.8% on the tensions, the only sector to fall in early trade.
U.S. President Donald Trump signed executive orders banning Chinese social media platforms WeChat – owned by Chinese tech giant Tencent (0700.HK) – and TikTok starting next month, and imposed sanctions on 11 Hong Kong and Chinese officials.
U.S. regulators also recommended that overseas companies listed on American exchanges be subject to U.S. public audit reviews from 2022.
The U.S.-China tensions has stoked fears about an adverse impact on trade talks. Any friction here could complicate the global recovery from the coronavirus pandemic, investors said.
Earlier, Asian shares outside Japan .MIAPJ0000PUS seesawed in holiday-thinned trade, staying below a six-and-a-half-month peak touched last week. They were last flat.
WAITING FOR WASHINGTON
Causing further uncertainty for investors are talks in Washington over a U.S. fiscal stimulus package. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin on Sunday said they were open to resuming aid talks.
Trump has sought to take matters into his own hands, signing executive orders and memorandums aimed at unemployment benefits, evictions, student loans and payroll taxes.
With investors worried that the U.S. recovery may lag behind those in other major economies, the dollar’s two-year supremacy has slipped.
Against a basket of currencies, the dollar gained 0.3% to 93.620 =USD and still just above a two-year trough.
“The fresh stimulus provided by President Trump through executive orders is better than none at all and provides a stop- gap solution,” wrote analysts at MUFG in London.
