Stocks rally on swift recovery hopes

LONDON — Growing optimism about a swift global economic recovery pushed equity markets higher on Wednesday, as investors took heart from further easing of lockdowns while looking past China-US tensions and civil unrest across America.

The upbeat mood  —  and hopes for an extension to a massive oil output cut agreement  —  resulted in Brent crude futures breaking the $40-mark for the first time in nearly three months, before profit-taking kicked in.

Governments in Europe and Asia have become confident enough to lift containment measures that have likely pushed the world economy into recession and destroyed tens of millions of jobs.

“The lifting of lockdown restrictions combined with enormous central bank support means investors are shrugging off little things like collapsing GDP and worsening US-China tension,” said Neil Wilson at trading site Markets.com. 

In Europe, the main London, Frankfurt and Paris indices were solidly higher in early afternoon trading.

On Wall Street, the DJIA added more than 200 points at the opening bell.

Earlier, Tokyo and Hong Kong stock markets closed up more than 1 per cent, while Sydney put on 1.8 per cent after data showed the Australian economy contracted at a slower rate than feared in the first quarter  —  though it remains on course for its first recession in nearly 30 years.

More fuel for oil rally 

“For now the good virus news... [is] more than outweighing the bad,” National Australia Bank said in a client note.

However, it warned that there remained a lot of risk that could spark a massive sell-off.

World Bank head David Malpass was also concerned about the outlook, saying estimates that anti-virus measures would wipe out $5 trillion are likely to fall far short of the actual damage.

Oil prices rose in Asian trading on hopes that major producers will meet to extend their output cuts by one month to August, while investors were also cheered by signs of a further drop in US stockpiles indicating demand is improving.

“The most bullish outcome for oil from the meeting is no sign of squabbling between Russia and Saudi Arabia,” whose price war earlier this year helped send prices crashing, said Stephen Innes of AxiCorp.

“Headlines suggest they are on the same page on supply, and that’s bullish for oil in the context of an improving demand backdrop.”

Crude futures cooled in later European deals.