Asia stocks scale 3-month peak, resilient to U.S. rioting

SYDNEY/HONG KONG (Reuters) – Asian shares advanced to three-month highs on Monday as progress on re-opening economies helped offset jitters over riots in U.S. cities and unease over Washington’s power struggle with Beijing.

There was also relief that while President Donald Trump began the process of ending special U.S. treatment for Hong Kong to punish China, he left their trade deal intact.

“With specific and verifiable measures against China appearing to be weak, markets may draw hollow consolation that the U.S. is treading carefully,” said analysts at Mizuho in a note.

After a cautious start Asian markets were led higher by China on signs parts of the domestic economy were picking up. Hong Kong .HSI managed to rally 3.3%, while Chinese blue chips .CSI300 put on 2.54%.

An official business survey from China showed its factory activity grew at a slower pace in May but momentum in the services and construction sectors quickened.

“Geopolitical risk can be sufficient to trigger an equity pullback. However, we remain comfortable with our preference for Chinese equities given they tend to be far more sensitive to domestic demand and policy stimulus than global drivers,” said strategists at Standard Chartered Private Banking in a note.

The hopeful signs in China helped lift MSCI’s broadest index of Asia-Pacific shares outside Japan 2.45% to its highest since early March. Tokyo’s Nikkei .N225 added 0.84% to also reach a three-month peak.

E-Mini futures for the S&P 500 recovered to be flat, having been up 0.12% in afternoon trade. EUROSTOXX 50 futures firmed 1.48% and FTSE futures 1.3%.

The resilience was notable given major U.S. cities were cleaning up streets strewn with broken glass and burned out cars as curfews failed to stop confrontations between activists and law enforcement.

The turmoil was a fresh setback for the economy which was only just emerging from a downturn akin to the Great Depression. Following poor data on spending and trade out on Friday, the Atlanta Federal Reserve estimated economic output could drop a staggering 51% annualised in the second quarter.

The May jobs report due out on Friday is forecast to show the unemployment rate surged to 19.8%, smashing April’s record 14.7%. Payrolls are expected to drop by 7.4 million, on top of the 20.5 million jobs lost the previous month.

YEARS, NOT MONTHS

“Current unemployment numbers go far beyond what has been experienced in any post-war recession,” wrote Barclays economist Christian Keller in a note.

“To the extent that some sectors may never return to pre-pandemic business-as-usual, labour faces a substantial challenge to reallocate workers,” he added. “Such a process could be a matter of years rather than months or quarters and in the meantime it would weigh on consumer demand.”

Bond investors suspect economies will need massive amounts of central bank support long after they reopen and that is keeping yields super low even as governments borrow much more.

Yields on U.S. 10-year notes were trading steady at 0.66% having recovered from a blip up to 0.74% last month when the market absorbed a tidal wave of new issuance.

The decline in U.S. yields has been a burden for the dollar, but the world’s reserve currency also tends to benefit from safe-haven status to limit the losses.

In afternoon trade, the dollar was 0.3% softer on a basket of peers at 97.923 having touched an 11-week low of 97.944 on Friday. It was also down on the yen at 107.50.

Much of the dollar’s recent decline has come against the euro which has been broadly boosted by plans for an EU stimulus package. The single currency was last up at $1.1143, after climbing 1.8% last week.

Markets are awaiting a meeting of the European Central Bank on Thursday where it is widely expected to raise its asset buying by around 500 billion euros to 1.25 trillion.

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In commodity markets, gold added 0.91% to $1,742 an ounce.

Oil prices initially eased on worries about U.S. demand, but found support from reports Russia had no objection to the next meeting of OPEC and its allies being brought forward to June 4 from the following week.

Brent crude futures were off 37 cents at $37.70 a barrel, while U.S. crude fell 31 cents to $35.38.

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Asian stocks pull back as Hong Kong uncertainty weighs

NEW YORK (Reuters) – Asian shares shed some of their recent gains on Wednesday as investor concerns about rising tensions between the United States and China tempered optimism about a re-opening of the world economy.

U.S. President Donald Trump said late on Tuesday he is preparing to take action against China this week over its effort to impose national security laws on Hong Kong, but gave no further details.

Worsening relations between the world’s two biggest economies will further hobble global growth, already in the doldrums due to the coronavirus pandemic worldwide.

E-Mini futures for the S&P 500 edged down 0.05%, just short of the 3,000 chart level. The index had cleared 3,000 points in Wall Street overnight before pulling back, as some traders returned to the New York Stock Exchange floor for the first time in two months.

The Nikkei share average slipped 0.1%, unwinding some of the gains made on Tuesday when it climbed to their highest in nearly 12 weeks. Australia’s ASX 200 lost 0.9% in early trade and South Korea’s KOSPI fell 0.2%.

Graphic: Asian stock markets – here

“The S&P500 looked to be set to close above 3,000 until the late headline that the United States was considering a range of sanctions on Chinese officials and businesses should China go ahead with its legislation regarding Hong Kong,” analysts at the National Australia Bank said in a note.

“The extent of those possible sanctions is uncertain,” the analysts said.

China’s plans to impose national security laws in Hong Kong have triggered the first big street unrest in the Asian financial hub for the first time since last year. Overnight, hundreds of riot police took up posts around Hong Kong’s legislature in anticipation of protests on Wednesday.

Indeed, some analysts warned that even the recent jump in share prices showed signs of caution.

“Stock buying in the last 24 hours has a strong defensive bent,” Michael McCarthy, chief market strategist at CMC said in a note. “Beaten down consumer and financial stocks are leading markets higher, at the expense of the previously popular tech and healthcare sectors.”

Moderating demand for risk helped the safe-haven U.S. dollar index to edge up 0.03% to 99.042, reversing from losses overnight.

U.S. Treasury yields retreated from levels struck overnight, with two-year yields hovering at 0.170%, up from a record low of 0.105% struck on May 8, but still under 0.20%.

Gold prices rebounded from losses as some investors played it safe, with spot gold unchanged at $1,711.45 per ounce.

The retreat from risk led oil prices to give up earlier gains. U.S. West Texas Intermediate crude futures were down 0.3%.

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Japan shares scale 10-week peak, S&P 500 up sharply

SYDNEY (Reuters) – Asian shares forged ahead on Tuesday while U.S. stock futures breached a major chart barrier as investors brushed past Sino-U.S. trade tensions to more stimulus in China and a re-opening world economy.

Japan’s Nikkei .N225 took the lead with a rise of 1.7% to its highest since early March when the economic impact of the coronavirus was just becoming clear.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1.6%, while South Korea .KS11 rose 1.5%.

E-Mini futures for the S&P 500 climbed 2% to clear the 3,000 chart level. EUROSTOXX 50 futures added 0.98% and FTSE futures 2.2%.

Chinese blue chips .CSI300 firmed 0.8% after the country’s central bank said it would strengthen economic policy and continue to push to lower interest rates on loans.

While largely reiterations of past comments, they helped offset the war of words between Washington and Beijing over trade, the coronavirus and China’s proposals for stricter security laws in Hong Kong.

“U.S.-China tensions continue to simmer in the background, but equity investors appear more interested on the prospect of economies reopening around the globe,” said Rodrigo Catril, a senior FX strategist at NAB.

“On this score, Japan ended its nationwide state of emergency, Spaniards have returned to bars in Madrid wearing masks and England will reopen some businesses on June 1.”

There were reports Tuesday that Germany wants to end a travel warning for tourist trips to 31 European countries from June 15 if the coronavirus situation allows.

Bond investors suspect economies will still need massive amounts of central bank support long after they reopen and that is keeping yields low even as governments borrow much more.

Yields on U.S. 10-year notes were trading at 0.67% having recovered from a blip up to 0.68% last week when the market absorbed a tidal wave of new issuance.

The decline in U.S. yields might have been a burden for the dollar but with rates everywhere near or less than zero, major currencies have been holding to tight ranges.

The dollar was a fraction firmer on the yen on Monday at 107.83 JPY= but well within the 105.97 to 108.08 band that has lasted since the start of May.

The euro was a shade firmer at $1.0916 EUR=, having spent the month so far wandering between $1.0765 and $1.1017.

Against a basket of currencies the dollar was 0.2% lower at 99.620 =USD, but still sandwiched between support at 99.001 and resistance around 100.560.

Analysts at CBA felt the dollar could break higher should China-U.S. tensions actually threaten their trade deal.

“Although not our central scenario, if the U.S. or China were to withdraw from the Phase One deal, USD would sharply appreciate while CNH, AUD and NZD would decline,” they wrote in a note to clients.

In commodity markets, gold edged up 0.2% to $1,733 an ounce.

Oil prices were supported by falling supplies as OPEC cut production and the number of U.S. and Canadian rigs dropped to record lows for the third week running.

Brent crude futures rose 71 cents to $36.24 a barrel, while U.S. crude gained $1.14 to $34.39.

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Global stocks skid as Hong Kong returns as Sino-U.S. flashpoint

TOKYO (Reuters) – Global shares tumbled on Friday as Hong Kong’s political unrest returned as a flashpoint in fast-deteriorating U.S.-China relations, following Beijing’s moves to impose a new security law on the city.

The Asian financial hub’s benchmark Hang Seng index .HSI sank 5% to a seven-week low, pulling MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS down 2.5%.

The CSI300 index of mainland Chinese shares .CSI300 dropped 1.9% while Japan’s Nikkei .N225 lost 1%. Pan-European Euro Stoxx 50 futures STXEc1 were down 0.97% while e-mini futures for U.S. S&P500 EScv1 lost 0.8%.

China is set to impose new national security legislation on Hong Kong to tighten its grip on the semi-autonomous city.

The decision drew a warning from President Donald Trump that Washington would react “very strongly” against the attempt to gain more control over the former British colony.

“It is starting to look like a U.S.-China summer of discontent in the making,” said Stephen Innes, chief global market strategist at AxiCorp.

“So far, China’s response has been relatively tame despite Trump’s daily goading. That might be due so that policymakers can focus on the NPC, but there is always the possibility of a firmer response.”

Hong Kong activists called on Friday for people to rise up against Beijing’s plans although a proposed midday march in the central financial district did not materialise.

The new Sino-U.S. rift comes amid already tense relations between the two superpowers after Washington stepped up its rhetoric against China over the coronavirus and other points of difference.

Earlier this month, the U.S. State Department delayed a report to Congress assessing whether Hong Kong enjoys sufficient autonomy from China to continue receiving special treatment from the United States.

Washington has ramped up criticism of China over the origins of the pandemic. Last week, it moved to block global chip supplies to blacklisted telecoms equipment giant Huawei Technologies, while the U.S. Senate passed legislation that could prevent some Chinese companies from listing their shares on U.S. exchanges.

Rising tensions are casting a pall over recent optimism that the worst of the pandemic’s economic impact was already over in most developed countries.

The pace of recovery remains highly uncertain — a point highlighted by China’s decision not to set an economic growth target this year for the first time in decades.

While Beijing pledged more government support for the virus-hit economy, it set a target to create over 9 million urban jobs this year, down from a goal of at least 11 million in 2019 and the lowest since 2013.

“The absence of a GDP growth target for this year confirms that, as we expected, policymakers accept that, after the plunge in Q1, economic growth will be low for 2020 as a whole even with a significant sequential recovery in Q2-Q4,” Oxford Economics said in a note to clients.

“The sizeable overall fiscal deficit target indicates significant policy support for the domestic recovery that we expect to continue despite the challenging external background. We expect year-on-year GDP growth to average 4% in H2.”

The worsening mood pushed riskier currencies lower, with the Australian dollar dropping 0.5% to $0.6531 AUD=D4 and the euro easing 0.25% to $1.0922 EUR=.

The safe-haven yen gained 0.15% to 107.45 per dollar JPY=.

The yen brushed off the Bank of Japan’s new lending scheme to channel more money to small businesses, which mimics the U.S. Federal Reserve’s “Main Street” programme.

The decision had been widely anticipated after the BOJ flagged the creation of the scheme last month.

Oil prices also tumbled from a two-month peak with U.S. crude futures CLc1 losing 7.3% to $31.44 per barrel.

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Asia shares follow S&P 500 higher, oil and gold jump

SYDNEY (Reuters) – Asian shares were led higher by S&P 500 futures on Monday and oil prices hit a five-week peak as countries’ efforts to re-open their economies stirred hopes the world was nearer to emerging from recession.

Summer weather is enticing much of the world to emerge from coronavirus lockdowns as centres of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

“The economies of Europe and the U.S. likely bottomed out in April and are slowly starting to come back to life,” wrote Barclays economist Christian Keller in a note.

“However, incoming data from most economies highlight the depth of the contraction, raising risks of longer-term scarring that might undermine the recovery.”

Federal Reserve Chairman Jerome Powell took a cautious line in an interview over the weekend, saying a U.S. economic recovery may stretch deep into next year and a full comeback might depend on a coronavirus vaccine.

Late Sunday, Powell outlined the likely need for three to six more months of government financial help for firms and families.

Data out on Friday showed retail sales and industrial production both plunged in April, putting the U.S. economy on track for its deepest contraction since the Great Depression.

Closer to home, data in Japan confirmed the world’s third largest economy slipped into recession in the first quarter, putting it on course for its worst postwar slump as the coronavirus takes a heavy toll.

Adding to the uncertainty were the trade tensions between the United States and China, with Beijing warning it was opposed to the latest rules against telecoms equipment company Huawei.

MSCI’s broadest index of Asia-Pacific shares outside Japan still edged up 0.4%. Japan’s Nikkei .N225 rose 0.6% and Chinese blue chips .CSI300 0.3%.

More carefree were E-Mini futures for the S&P 500 ESc1 which added 1.1%, even though results from a raft of U.S. retailers this week are likely to make grim reading.

EUROSTOXX 50 futures also gained 1.5% and FTSE futures 1.4%.

Dealers reported much chatter about a possible treatment for COVID-19 from drug maker Sorrento Therapeutics (SRNE.O) which saw its shares soar on Friday.

Another focus will be the U.S. Treasury Department’s first auction for its 20-year bond on Wednesday. Treasury plans to borrow a record amount of nearly $3 trillion this quarter.

So far, the market has easily absorbed the flood of new debt with 10-year yields holding to a tight range around 0.64%.

The dollar has also been largely range-bound, with its safe-haven appeal keeping it well supported overall. Against a basket of currencies, it was last at 100.380 having drifted 0.7% higher last week.

The euro was steady at $1.0826 EUR=, while the dollar was a fraction firmer on the Japanese yen at 107.10 JPY=.

The pound touched a seven-week low at $1.2073 GBP= after the chief economist of the Bank of England said it was looking more urgently at options such as negative interest rates and buying riskier assets to prop up the economy.

In commodity markets, the flood of liquidity from central banks combined with record-low interest rates to help lift gold to a seven-year peak. The metal was last up 1.2% to $1,762 an ounce, with silver and palladium also on a roll.

Oil prices rose as demand picked up as countries around the world eased travel restrictions.

Brent crude futures firmed 96 cents to $33.46 a barrel, while U.S. crude rose 98 cents to $30.41.

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Italy's daily coronavirus death toll and new cases dip

ROME (Reuters) – Deaths from the COVID-19 epidemic in Italy fell to 242 on Friday, against 262 the day before, the Civil Protection Agency said, while the daily tally of new cases dipped to 789 from 992 on Thursday.

The total death toll since the outbreak came to light on Feb. 21 now stands at 31,610 the agency said, the third highest in the world after those of the United States and Britain.

The number of confirmed cases amounts to 223,885, the fifth highest global tally behind those of the United States, Spain, Britain and Russia.

People registered as currently carrying the illness fell to 72,070 from 76,440 the day before.

There were 808 people in intensive care on Friday, down from 855 on Thursday, maintaining a long-running decline. Of those originally infected, 120,205 were declared recovered against 115,228 a day earlier.

The agency said 1.859 million people had been tested for the virus against 1.820 million on Thursday, out of a population of around 60 million.

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Asia stocks get China trade relief, U.S. bonds face debt deluge

SYDNEY (Reuters) – Asian shares pared early losses on Thursday after Chinese exports proved far stronger than even bulls had imagined, while U.S. bond investors were still daunted by the staggering amount of new debt set to be sold in coming weeks.

Beijing reported exports rose 3.5% in April on a year earlier, completely confounding expectations of a 15.1% fall and outweighing a 14.2% drop in imports.

The surprise stoked speculation the Asian giant could recover from its coronavirus lockdown quicker than first thought and support global growth in the process.

The news helped some regional markets steady after a shaky start with both Japan’s Nikkei .N225 and South Korea .KS11 back to flat.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.4%, led by a 0.3% dip in Chinese blue chips .CSI300.

E-Mini futures for the S&P 500 ESc1 fared better with a bounce of 0.5%, while EUROSTOXX 50 futures STXEc1 and FTSE futures FFIc1 both firmed 0.2%.

Markets had started cautiously with renewed Sino-U.S. tensions lurking in the background.

U.S. President Donald Trump said he would be able to report in about a week or two whether China is meeting its obligations under a trade deal, as Washington weighed punitive action against Beijing over its handling of the coronavirus outbreak.

The flow of economic data also remained grim, with U.S. private employers laying off 20 million workers in April.

Figures due later on Thursday are forecast to show initial jobless claims rose a further 3 million last week, while Friday’s payrolls report is expected to see 22 million jobs lost and unemployment hit 16% or higher.

On Wall Street, energy and utility sectors were the main losers while demand for techs kept the Nasdaq in the black.

The Dow .DJI had ended down 0.91% and the S&P 500 .SPX 0.70%, while the Nasdaq .IXIC added 0.51%.

WORLD’S BIGGEST BORROWER

Bond markets saw one of the largest shifts in a while after the U.S. Treasury said it would borrow an astonishing $2.999 trillion during the June quarter, five times larger than the previous single-quarter record.

It will sell $96 billion next week alone and a surprising amount of that will be at longer tenors, which in turn pushed up long-term yields and steepened the curve.

Yields on 30-year bonds US30YT=RR jumped 7 basis points to 1.40%, the largest daily increase since mid-March.

That rise gave a lift to the U.S. dollar on most currencies and its index firmed to 100.192 =USD. The euro eased to $1.0800 EUR=, hurt in part by a gloomy economic outlook from the European Commission.

Indeed, the single currency sank to its lowest against the Japanese yen since late 2016 at 114.40 EURJPY=, and even the dollar touched a seven-week trough at 105.98 yen JPY=.

“There’s a lot to like about the yen these days,” said Deutsche Bank’s global head of G10 FX Alan Ruskin.

He noted that with rates across the globe falling to all time lows, the yen no longer had a large yield disadvantage.

“Across all of 3m, 2y, 5y and long-end tenors, the average spread between yen rates and the average of G10 yields are at lows not seen for at least the last three decades,” he said.

The yen was also cheap by many measures, he argued, with fair value put at around 85 per dollar.

In commodity markets, gold eased on expectations that supplies will grow as bullion refineries resume operations. The metal was last up 0.3% at $1,691.54 an ounce XAU=.

Oil prices inched higher after a six-session streak of gains which saw Brent almost double since hitting a 21-year low in April.

Brent crude LCOc1 futures were last up 21 cents at $29.93 a barrel, while U.S. crude CLc1 rose 12 cents to $24.11.

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Dollar edges up, Asian stocks slip as U.S.-China tensions flare

SINGAPORE (Reuters) – The dollar inched higher, stock markets struggled for traction and oil fell on Monday as a U.S.-China spat over the origin of the coronavirus put the brakes on optimism about an economic re-start as countries around the world ease restrictions.

In reduced trade, with China and Japan on holiday, U.S. stock futures fell 1.7% and U.S. crude tumbled 7%. The safe-haven U.S. dollar rallied to one-week highs against the risk sensitive Australian and New Zealand dollars.

South Korea’s KOSPI fell, Hong Kong’s Hang Seng returned from a two-session holiday with a 3.5% drop, while Australia’s ASX 200 eked out a 0.5% gain.

The moves extended a dour start in May which began on Friday with bleak U.S. data and the threat of fresh trade-war hostilities between the world’s two biggest economies.

U.S. President Donald Trump and Secretary of State Mike Pompeo added to worries with fresh efforts to pin blame for the pandemic on China, where the new coronavirus outbreak is believed to have originated.

The latest salvo came from Pompeo on Sunday who said there was “a significant amount of evidence” that the virus emerged from a laboratory in the central Chinese city of Wuhan.

Pompeo did not provide evidence, or dispute a U.S. intelligence conclusion that the virus was not man-made. But the comments double down on Washington’s pressure on China as U.S. deaths and economic damage mount.

“The risk of a pullback has increased this week,” said Chris Weston, head of research at Melbourne brokerage Pepperstone.

“The United States is not alone in publicly taking aim at China, but whether it’s Trump, Kudlow or Pompeo the narrative is more frequent, and traders are selling yuan,” he said.

With Chinese markets shut on the mainland, offshore yuan extended Friday’s slump to hit a six-week low of 7.1560 per dollar before clawing back to flat.

The Australian dollar dropped below the 64-cent mark for the first time in a week, falling 0.4% to $0.6390.

Benchmark U.S. 10-year Treasuries hardly budged from elevated levels, with the yield holding at 0.6181% as demand for safe-haven assets was firm. Gold steadied at $1,696.41 per ounce.

BLAME GAME

An increase in tension between Washington and Beijing comes as both countries suffer the economic fallout from the pandemic and the disruption wrought by lockdowns to combat it.

China has reported its first quarterly GDP contraction since such records began a generation ago, and posted a slump in April export orders last week.

U.S. manufacturing plunged to an 11-year low last month, consumer spending has collapsed and some 30.3 million Americans have filed claims for unemployment in the last six weeks.

“Trump is looking to get re-elected…,” said Nomura’s joint head of APAC equity research Jim McCafferty, likening the move to “Japan-bashing” by then-president Ronald Reagan in the 1980s.

“We’ve seen this before, and I think as governments around the world become increasingly domestically focused…finding a villian elsewhere makes a lot of sense,” he said.

That means a challenge for investors looking for income which seems to have, for now, stumped even billionaire Warren Buffett.

Buffett’s firm, Berkshire Hathaway, made an almost $50 billion loss in the first quarter, but ended it with a record cash pile and nothing to spend it on.

Buffett said he remains keen on making a big acquisition, but has not provided financial support to companies as he did during the 2008 financial crisis because he saw nothing attractive enough.

Elsewhere in currency markets, the safe-haven Japanese yen rose 0.2% to 106.72 per dollar and the euro was a touch weaker at $1.0950. The pound and New Zealand dollar slipped.

In commodity markets, U.S. crude futures sank in early trade on worries about oil oversupply and crumbling demand, even as some U.S. states and cities around the world start to ease coronavirus pandemic restrictions.

West Texas Intermediate crude futures last sat at $18.38 per barrel, down $1.40, while Brent futures were down 2.4%, or 62 cents, at $25.82.

The U.S. April jobs report will be released on Friday, but some analysts say it may not fully reflect how many people have been thrown out of work.

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Italy's daily coronavirus death toll jumps, new cases stable

ROME (Reuters) – Deaths from the COVID-19 epidemic in Italy jumped by 474 on Saturday, against 269 the day before, the Civil Protection Agency said, posting the largest daily toll of fatalities since April 21.

The steep increase in deaths followed a long, gradual declining trend and was due largely to Lombardy, the country’s worst affected region, where there were 329 deaths in the last 24 hours compared with just 88 the day before.

The daily tally of new infections was broadly stable for a third day running at 1,900 against 1,965 on Friday.

The total death toll since the outbreak came to light on Feb. 21 now stands at 28,710, the agency said, the second highest in the world after that of the United States.

The number of confirmed cases amounts to 209,328, the third highest global tally behind those of the United States and Spain.

People registered as currently carrying the illness fell to 100,704 from 100,943 on Friday.

There were 1,539 people in intensive care on Saturday, slightly down from 1,578 on Friday and maintaining a long-running decline. Of those originally infected, 79,914 were declared recovered against 78,249 a day earlier.

The agency said 1.430 million people had been tested for the virus against 1.399 million the day before, out of a population of around 60 million.

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Asia shares turn cautious before earnings, U.S. crude crushed

SYDNEY/HONG KONG (Reuters) – Caution gripped Asian share markets on Monday amid expectations a busy week of corporate earnings reports and economic data will drive home the damage done by the global virus lockdowns, while a glut of supply sent U.S. crude spiraling to 20-year lows.

European stocks were headed for a strong start, however, with the pan-region EUROSTOXX 50 futures STXEc1 up 1.23%, German DAX futures FDXc1 gaining 1.26% and FTSE futures FFIc1 up 0.93%.

E-Mini futures for the S&P 500 ESc1 slipped 0.46%, having jumped last week on hopes some U.S. states would soon start re-opening their economies.

Japan reported its exports fell almost 12% in March from a year earlier, with shipments to the United States down over 16%. Readings on April manufacturing globally are due on Thursday and are expected to hit recession-era lows.

Better news came from New Zealand where success in containing the virus allowed the government to announce an easing in the country’s strict lockdown from next week.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS eased 0.23% in slow trade, pausing after five straight weeks of gains.

Japan’s Nikkei .N225 fell 1.19%, but Chinese shares .SSEC edged up 0.37% as a benchmark lending rate was lowered to shore up the coronavirus-hit Chinese economy after it contracted for the first time in decades.

U.S. President Donald Trump said on Sunday that Republicans were “close” to getting a deal with Democrats on a support package for small business.

The United States has by far the world’s largest number of confirmed coronavirus cases, with more than 750,000 infections and over 40,500 deaths, according to a Reuters tally.

The S&P 500 .SPX has still rallied 30% from its March low, thanks in part to the extreme easing steps taken by the Federal Reserve. The Fed has bought nearly $1.3 trillion of Treasuries alone, and many billions of non-sovereign debt it would historically have never gone near.

“The Fed will be a major buyer of risky assets in the coming months, and has displayed its willingness to backstop virtually any part of the domestic financial system in trouble,” said Oliver Jones, a senior markets economist at Capital Economics.

MARKET CONCENTRATION

Yet the particular composition of the S&P 500 was also a major factor, he added, as three sectors relatively resilient to a virus-induced lockdown — IT, communications services and healthcare — make up around 50% of the index.

Indeed, Microsoft, Apple, Amazon, Alphabet and Facebook account for more than a fifth of the index.

“What’s more, the S&P 500 is skewed towards a few ultra-large firms, some of which are also in those sectors,” Jones said. “Their sheer size might make them better able to weather a few months of dramatically-low revenues than most.”

The rebound in the S&P 500 therefore likely overstated optimism on the economy, Jones argued, noting European benchmark equities indices and U.S. small cap indices were still in bear market territory.

Bond markets suggested investors expected tough economic times ahead with yields on U.S. 10-year Treasuries US10YT=RR steady at 0.63%, from 1.91% at the start of the year.

“We are dealing with scales of declining economic activity that nobody has seen before. The potential hit to GDP in the second quarter this year will probably far exceed what we saw at the worst point of the financial crisis,” Capital Group’s economist Robert Lind said in a note.

That decline has shrunk the U.S. dollar’s yield advantage over its peers and left it rangebound in recent weeks. So far in April, the dollar index =USD has wandered between 98.813 and 100.940 and was last at 100.060.

The dollar was a fraction firmer on the yen on Monday at 107.92 JPY= but again well within recent ranges, while the euro idled at $1.0842 EUR=.

Gold had recoiled to $1,676 per ounce XAU=, having touched a 7-1/2 peak of $1,746.50 last week.

Oil prices remained under pressure as the global lockdown saw fuel demand evaporate, leaving so much extra supply countries were finding it hard to find space to store it.

So great was the near-term glut that the May futures contract for U.S. crude was trading down over 18% at $14.81 a barrel CLc1, while June shed 6.19% to $23.48 CLc2.

Brent crude LCOc1 does not have the same storage problems and its June contract was off only 1.02% at $27.06 a barrel.

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