European equities rallied Monday as countries gradually continue to reopen their economies and lift coronavirus lockdown restrictions.
The French CAC 40 finished up by around 1.9%, while Germany’s DAX index gained 2.6%. U.S. and U.K. markets were closed Monday for Memorial Day and the U.K. spring bank holiday, respectively.
France’s biggest movers were commercial real estate company Unibail Rodam Westfield, up more than 7%; hospitality group Accor, up 6%; and French aerospace giant Airbus, up 8%.
Germany’s rally was led by aircraft engine manufacturer MTU Aero Engines, up 7% and carrier Lufthansa, up around 6% on the news that it’s approaching a deal for a 9 billion euro bailout from the German government.
German pharmaceutical giant Bayer also led the index’s rise Monday, trading more than 8% higher. Bayer’s stock price was boosted by reports that it had reached agreements over a raft of U.S. lawsuits involving its Roundup weedkiller.
France and Germany’s gradual reopenings are milestones in what is hoped will be the start of the countries’ economic recoveries. On Sunday, churches in France held their first mass in two months as the government allowed houses of worship around the country to reopen.
Some lockdown restrictions in France were lifted beginning May 11 as part of a phased reopening; phase 2, which will allow cafes and bars in the country’s lower risk “green zones” to reopen, is slated for June 2.
The number of new cases in Germany rose slightly over the weekend. Germany’s reopening began in the first week of May, with all shops allowed to reopen as coronavirus cases stabilized. Each of the country’s 16 federal states are in charge of their own reopening.
Britain’s FTSE .FTSE and Japan’s Nikkei .N225 led their regions with 2.2% gains, while U.S. S&P 500 futures ESc1 cleared the 3,000 level for the first time since early March, when the economic impact of the coronavirus was just becoming clear.
Europe’s early spurt saw the STOXX 600 score a near 11-week high. Travel and leisure stocks jumped almost 6% .SXTP after Spain had said quarantine-free tourism would resume next month and Germany edged towards a 9 billion-euro bailout of airline Lufthansa.
Italian, Spanish and other southern euro zone government bonds gained and a weaker dollar helped the euro, the pound, and holiday-hotspot currencies like Turkey’s lira.
“Investors are trying to be optimistic here and think that everything is going to be OK,” said Christopher Peel, the chief investment officer of Tavistock Wealth. “You can’t fight it … I’m not trying to fight it. But it is totally disconnected from economic reality.”
Overnight saw another high-profile casualty of coronavirus as Latin America’s largest airline, LATAM Airlines Group (LTM.SN) and its affiliates in Chile, Peru, Colombia, Ecuador filed for bankruptcy protection in the United States. The car- rental firm Hertz (HTZ.N) had done the same on Friday.
MSCI’s broadest index of Asia-Pacific shares outside Japan had advanced 1.7% overnight.
South Korea .KS11 closed up 1.75% and Chinese blue chips .CSI300 ended 1.1% higher 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.
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“On this score, Japan ended its nationwide state of emergency, Spaniards have returned to bars in Madrid wearing masks and England will re-open some businesses on June 1.”
In addition, Germany wants to end a travel warning for tourist trips to 31 European countries from June 15 if the coronavirus situation allows, the news agency dpa reported.
Bond investors suspect economies will still need massive amounts of central bank support long after they re-open and that is keeping yields low even as governments borrow much more.
Yields on U.S. 10-year notes US10YT=RR were trading at 0.67% after rising to 0.68% last week, when the market absorbed a wave of new issuance.
The decline in U.S. yields might have weighed on the dollar but with rates everywhere near or less than zero, major currencies have been holding to tight ranges.
The dollar was up against the yen at 107.80 JPY=, still within the 105.97 to 108.08 band that has lasted since the start of May. The euro gained to $1.0939 EUR=, having spent the month so far 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 XAU=.
