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Stocks adrift as vaccine rally falters; gold and bonds rise
May 20, 2020
SINGAPORE (Reuters) – Asian stocks struggled to extend the week’s rally on Wednesday, and gold and bonds firmed, as a sceptical press report dented some hopes for a COVID-19 vaccine and concerns about the global recovery from the pandemic returned.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat. The risk-sensitive Australian dollar retreated from a two-month high struck on Tuesday and safe-haven demand drove U.S. Treasury yields back under 0.7%.
European futures were subdued with FTSE futures and EuroSTOXX 50 futures down 0.3%. S&P 500 futures rose 0.6%.
The drift follows a downbeat end to Tuesday trade on Wall Street after a report from medical news website STAT cast doubt over encouraging early results from a Moderna Inc COVID-19 vaccine trial.
The report said the results, which had rallied global stocks this week, lacked detail.
“This is probably more a stabilisation than anything else, because markets have rallied hard on opening up and the potential for a V-shaped recovery,” said Jun Bei Liu, a portfolio manager at Australia’s Tribeca Investment Partners.
“The market is a little bit directionless,” she said, with investors waiting to take their next cues from company outlook commentaries and confidence surveys.
Two thirds of 223 fund managers surveyed by Bank of America reckon recent gains are a bear-market rally.
Around Asia, the Chinese yuan and stocks in Hong Kong and China idled just under flat as investors wait to hear the government’s economic plans, due to be announced during the annual gathering of parliament beginning on Friday.
Australian shares ground higher and Japan’s Nikkei rose 1%, helped by a softer yen and anticipation that declining infection rates will make a case for swift economic re-opening.
Oil was steady and benchmark 10-year yields on U.S. Treasuries dipped 1.5 basis points to 0.6948%. Yields fall when prices rise.
Gold rose slightly to $1,745.84 per ounce.
Doubts about the outlook held back commodity prices from further gains, as more bad news poured forth.
Japanese business confidence slumped to a decade low as the economy entered recession while Australian retail sales suffered their steepest ever dive in April. British jobless claims are at their highest in 20 years.
And the U.S. economy won’t recover its lost ground until sometime after next year, the non-partisan Congressional Budget Office said on Tuesday.
Brent crude futures rose about 1% a barrel to $34.93 and U.S. crude rose 0.7% to $32.17.
“While countries have started to relax restrictions on economic and social activities, economies will not return to where things were before the outbreak,” said strategist at Singapore’s DBS bank in a note.
“Geopolitical tensions, especially between the U.S. and China, have also returned and are likely to intensify into the U.S. elections in November.”
In currency markets the euro remained supported in the afterglow of a Franco-German proposal for a common relief fund – a possible way through tensions between European Union members. It inched up to $1.0940.
Other majors steadied, while the Aussie and kiwi battled, mostly without success, to break out of the ranges that have held them for months.