- Stocks rallied on Wednesday for another session, shrugging off huge civil tensions in the US.
- Asian stocks were boosted by news that China's Caixin Services PMI Index rose to 55 in May, its highest level in 10 years.
- In the US, futures point to all three major indexes opening higher by between 0.35% and 0.7%, while in Europe, the continent-wide Stoxx 50 is up more than 2%.
- Analysts at Rabobank said: "
Markets continue to trade as if we are going to have a Hollywood ending." - Another analyst questioned whether markets are still in tune with reality.
Global stocks jumped again Wednesday, defying civil unrest in the US with analysts questioning whether investors are still in touch with reality.
Almost all major stock indices were green despite the
Protests erupted last week after the death of George Floyd while in police custody in Minneapolis. Floyd, who was black, died after a white police officer knelt on his neck for more than eight minutes.
While most protests are peaceful, some have erupted into civil unrest including violence, destruction of property and looting. This prompted President Trump to threaten to deploy troops on the streets to quash unrest.
Jeffrey Halley, senior market analyst, Asia-Pacific at OANDA, said: "No matter how many times you spin a top now, the risk-on price action of the world's financial markets, led by the perpetual v-shaped optimists of Wall Street, has left many of us wondering which reality we might actually be in?"
"Markets continue to trade as if we are all going to have a Hollywood ending where the good guys win, the bad guys lose, and everyone hugs and learns something," analysts at Rabobank said.
"Let's sit and looking at paper profits on a Bloomberg screen as a delicious meal is about to be delivered by a gig worker risking Covid-19 and street robbery and who earns less than the minimum wage! Everything everywhere is being resolved Hollywood style, right," further highlighting the notion that markets do not care about social justice.
Indeed, "Mad Money" host Jim Cramer said on Tuesday: "The stock market does not care about social justice".
Here's the market roundup as of 11.30 a.m. in London (6.30 a.m. ET):
- Asian indexes rose with Hong Kong's Hang Seng up 1.4% , China's Shanghai Composite up 0.1%, and Japan's Nikkei up 1.3%.
- European equities rose, with Germany's DAX up 2.5% Britain's FTSE 100 up 1.30% and the Euro Stoxx 50 up 2.1%.
- US stocks are set to open higher. Futures underlying the Dow Jones Industrial Average, the S&P 500, and the Nasdaq rose between 0.35% and 0.7%.
- Oil prices were broadly flat, with West Texas Intermediate up 0.15% at $36.86 a barrel , and Brent crude down 0.6% at $39.34 a barrel. Brent had earlier crossed above $40 per barrel for the first time in three months.
- The benchmark 10-year Treasury yield rose to 0.69%.
- Gold fell 0.5% to $1726 per ounce.
Gains for currency markets
Analysts pointed that the
"As a bellwether, AUD is up around 3.6% in four days. That is from a currency facing the worst economic downturn since the 1930s, the first recession since 1991 (as GDP was -0.3% q/q in Q1), a destroyed tourism sector, a housing sector which cannot logically hold up much longer, Rabobank said.
The
It has risen 5% in the last week alone.
Halley added: "I note that one of the favorite ways for markets to express a bullish sentiment, AUD/JPY, also rose by more than 2.0% overnight. That implies that plenty of momentum remains with the global recovery trade, even if it is a reality that is counterintuitive to most of us."
Investors pin hopes on economic recovery
Positive news came from China's service sector activity, which rebounded to reach a 10-year high in May.
China's Caixin Services Purchasing Managers Index rose to 55.0 in May, up from 44.4 in April. The last time the PMI hit 55 was in October 2010.
The fine line between contraction and expansion is 50, and Wednesday's results mark the first expansion since three months.
Halley said: "An excellent Caixin Services PMI from China has reinforced the view regionally, that a modest recovery is underway, further boosting regional stocks."
The price of Brent oil, the international benchmark crossed $40 the first time in 3 months. By late morning in Europe it was below that level again.