EMERGING MARKETS-Latam stocks, FX fall from near 3-month highs as risk rally pauses

    * Brazil's real falls after gaining 5% over two days
    * Mexican peso tracks oil prices lower
    * Argentine industrial output plummets in April

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    June 4 (Reuters) - Latin American stocks and currencies came
off near three-month highs on Thursday as a recent rally in risk
assets, driven by hopes of a post-coronavirus economic recovery,
lost steam.
    MSCI's index of Latam stocks and currencies
 broke a three-day winning streak, falling more
than 1% each.
    Still, analysts said risk assets held more upside strength,
with economic indicators across the globe indicating the worst
of the COVID-19 pandemic had passed. 
    Expectations of more stimulus measures, along with optimism
over a resurgence in economic activity, had driven emerging
market assets higher over the past weeks.
    Brazil's real broke a two-day rally that drove the
currency up about 5%, to trade 0.4% lower. The central
bank on Wednesday signaled that policymakers may be prepared to
cut interest rates more than they have previously indicated.

    A Reuters poll showed that along with broader emerging
market peers, Latam currencies are on a recovery path but depend
heavily on calmer domestic politics and signs of economic
recovery.   
    Brazil is moving aggressively to open its economy even as it
posts a record number of coronavirus -deaths. Latin America has
become a hot spot in the outbreak, with Brazil in the No. 2 spot
globally in the number of infections; Mexico overtook the United
States in daily reported deaths this week.

    Mexico's peso fell 0.5% against a steady dollar as
oil prices declined.
    The country's mining chamber on Wednesday said output will
likely fall by about 17% in 2020. Mexico had restarted the
mining industry last month after deeming it an essential sector.

    Chile's peso fell slightly, a day after the country's
central bank said it would gradually scale back its foreign
exchange intervention program in the non-deliverable forward
markets and speak with its U.S. and Chinese counterparts to
broaden the country's foreign exchange lines.   
    "We expect the CLP to underperform its peers in the near
term as the (central bank) buys dollars, although we think it is
likely to continue trading with the broad macro environment and
find support from (U.S.) Treasury sales," said Citigroup
analysts.
    Argentina's peso traded flat, while stocks
fell more than 1% as markets continued watch for the country to
restructure its sovereign debt.
    The country's April industrial output fell 33.5% from the
same month last year, as measures to contain the virus stymied
economic activity.
    Key Latin American stock indexes and currencies:
    
    Stock indexes             Latest     Daily % change
 MSCI Emerging Markets          988.26              0.02
                                        
 MSCI LatAm                    1974.75             -1.14
                                        
 Brazil Bovespa               93985.89              1.06
                                        
 Mexico IPC                   37843.63             -1.17
                                        
 Chile IPSA                    3844.14               0.3
                                        
 Argentina MerVal             43129.89            -1.649
                                        
 Colombia COLCAP               1159.02              0.08
                                        
                                                        
       Currencies             Latest     Daily % change
 Brazil real                    5.1030             -0.39
                                        
 Mexico peso                   21.8730             -0.53
                                        
 Chile peso                      771.5             -0.16
                                        
 Colombia peso                  3588.3              0.49
 Peru sol                       3.4317             -0.87
                                        
 Argentina peso                68.8900             -0.12
 (interbank)                            
                                        
 
    

 (Reporting by Susan Mathew in Bengaluru; editing by Jonathan
Oatis and Leslie Adler)
  

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CEE MARKETS-Currencies, stocks ease, with eyes on ECB stimulus moves

    BUCHAREST, June 4 (Reuters) - Central European currencies
fell on Thursday, with the crown and zloty leading regional
losses, as investors focused on the European Central Bank's
policy meeting, which is expected to  approve more aid to the
coronavirus-hit euro zone.
    The economic crisis caused by the new virus pandemic had
hammered currencies in the region, which is the main trading
partner of the euro zone, but a new risk-on mood has partly
helped them to recoup a significant part of their losses.
    By 0910 GMT, the Czech crown and the Polish zloty
 fell by 0.6% on the day to as low as 26.73 and 4.44
against the euro respectively.
    Czech National Bank Governor Jiri Rusnok said in a radio
interview on Thursday the crown was likely to stabilise around 
current levels it reached after recent strengthening.
   
    Hungary's forint eased 0.2% and the Romanian leu
edged down 0.1%. 
    Market watchers expect the ECB to increase bond purchases by
500 billion euros, but a key question is whether it will act on
Thursday or hold out until July as a deal on European Union-wide
fiscal support strengthens the case for patience.
    "Trade is pretty sluggish right now. The general focus is
now on the ECB's next policy moves and their timing," said one
dealer in Bucharest. 
    Stocks also fell, with Budapest's leading losses with
a 0.9% decline. MOL and OTP Bank fell 1.74%
and 3.16% respectively.
    Elsewhere, Romania's finance ministry plans to sell 700
million lei worth of 2027 treasury bonds and an additional 500
million lei of 2023 debt.
             CEE        SNAPSHOT     AT                         
             MARKETS                1129 CET            
                        CURRENCIES                              
                        Latest      Previous  Daily     Change
                        bid         close     change    in 2020
 Czech                     26.7300   26.5510    -0.67%    -4.86%
 crown                                                  
 Hungary                  345.5500  344.8000    -0.22%    -4.17%
 forint                                                 
 Polish                     4.4430    4.4100    -0.74%    -4.20%
 zloty                                                  
 Romanian                   4.8370    4.8315    -0.11%    -1.01%
 leu                                                    
 Croatian                   7.5720    7.5715    -0.01%    -1.67%
 kuna                                                   
 Serbian                  117.6100  117.6200    +0.01%    -0.03%
 dinar                                                  
 Note:       calculated from                  1800 CET          
 daily                                                  
 change                                                 
                                                                
                        Latest      Previous  Daily     Change
                                    close     change    in 2020
 Prague                     932.89  927.5300    +0.58%   -16.38%
 Budapest                 36937.69  37317.04    -1.02%   -19.84%
 Warsaw                    1758.90   1766.85    -0.45%   -18.19%
 Bucharest                 8927.32   8981.80    -0.61%   -10.52%
 Ljubljana                  861.34    860.56    +0.09%    -6.97%
 Zagreb                    1669.26   1673.45    -0.25%   -17.26%
 Belgrade    <.BELEX15      676.28    678.37    -0.31%   -15.64%
             >                                          
 Sofia                      456.92    458.87    -0.42%   -19.58%
                                                                
                        Yield       Yield     Spread    Daily
                        (bid)       change    vs Bund   change
                                                        in
 Czech                                                  spread
 Republic                                               
   2-year    <CZ2YT=RR      0.1000    0.0570   +072bps     +4bps
             >                                          
   5-year    <CZ5YT=RR      0.3870    0.0240   +097bps     +3bps
             >                                          
   10-year   <CZ10YT=R      0.7840    0.0700   +114bps     +8bps
             R>                                         
 Poland                                                         
   2-year    <PL2YT=RR      0.2260   -0.0140   +085bps     -3bps
             >                                          
   5-year    <PL5YT=RR      0.7810    0.0170   +136bps     +3bps
             >                                          
   10-year   <PL10YT=R      1.3810    0.0250   +174bps     +3bps
             R>                                         
             FORWARD                                            
                        3x6         6x9       9x12      3M
                                                        interban
                                                        k
 Czech Rep           <        0.27      0.28      0.30      0.34
             PRIBOR=>                                   
 Hungary             <        0.78      0.73      0.68      0.90
             BUBOR=>                                    
 Poland              <        0.26      0.28      0.30      0.27
             WIBOR=>                                    
 Note: FRA   are for ask prices                                 
 quotes                                                 
 *****************************************************          
 *********                                              
 
 (Editing by Larry King)
  

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MORNING BID-Sultans of stimulus

A look at the day ahead from Senior FX Correspondent, Saikat Chatterjee. The views expressed are his own.

The beleaguered U.S. dollar got some respite on Thursday as Wednesday’s ADP jobs survey showed 2.8 million jobs being lost, far short of forecasts of 9 million lost, and the ISM non-manufacturing PMI also beat estimates, though it continues to show a contraction. Neither data set would be considered decent under normal circumstances, but market moves show how starved investors are for any evidence of a turnaround that would justify the current elevated market valuations.

U.S. weekly jobless claims are also expected to recede on Friday, but an analysis of 44 countries by economists at Deutsche Bank put the U.S. economy the second worst in unemployment relative to its 10-year average, behind only Colombia. For currency markets that is a long-term negative for the dollar. But even in the short term, the prospects don’t look good. The latest Reuters poll of over 60 analysts predicts the dollar will weaken over the next six months.

Hopes of more stimulus has widened the chasm between market valuations and the real economy, despite expectations for a slow economic recovery, growing concern over U.S.-China tensions, U.S. civil unrest and rising coronavirus infections. On Wednesday, the Federal Reserve widened its municipal liquidity program to include more businesses and Australia offered a stimulus package for construction. Major U.S. stocks ended higher on Wednesday, with the S&P 500 and the Nasdaq near their record closing highs in February and 10-year U.S. treasury yields approached a two-month high of 0.75%. At a price-to-earnings multiple of 22, valuations for the S&P 500 are at their highest level in more than two decades. Although investors remain surprised at the stock market’s resilience, a case can be made for stretched valuations — the risk-free rate for valuing future streams of corporate cash flows is essentially zero as central banks support virtually every corner of the bond market.

And then there is the European Central Bank. Pressure is growing on policymakers to deliver more stimulus in the face of a record rate of economic contraction in the first quarter. Interest rates are widely expected to remain unchanged at its deposit rate of minus 0.5%, but many economists expect the 750 billion-euro Pandemic Emergency Purchase Programme to rise by 500 billion euros. The German coalition government agreed overnight on a 130 billion-euro fiscal stimulus program for its economy after a recovery fund proposal last week by Europe gave the struggling euro a shot in the arm.

The latest policy actions have resulted in a seven-day winning streak for the euro against the U.S. dollar, a move last seen only in December 2013. The euro’s rise to near 1.08 against the Swiss franc has also eased pressure on the Swiss central bank, whose rate of weekly interventions dropped to its lowest since February.

The dollar’s gains have pushed emerging-market currencies lower with the wider index snapping a four-day winning streak to slip 0.25%. The biggest declines came in South Africa’s rand and Mexico’s peso, both down 0.7%, but both still on track for healthy weekly gains. (Editing by Larry King)

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Asian stocks set to extend gains as stimulus fans recovery hopes

NEW YORK (Reuters) – Stronger appetite for riskier assets is set to lift Asian equities on Thursday, as government stimulus expectations support investor confidence in an economic recovery from the coronavirus.

E-mini futures for the S&P 500 were up 0.05% and Australian S&P/ASX 200 futures rose 1.23% in early trading. Japan’s Nikkei futures rose 1.1%.

The safe-have U.S. dollar continued to fall.

Markets for risk assets have been on a tear, carrying major stock market indexes to within sight of pre-pandemic, all-time highs.

MSCI’s gauge of stocks across the globe moved up for the seventh consecutive trading day on Wednesday with a gain of 1.68%.

The rise came as the Nasdaq Composite, S&P 500 and the Dow Jones Industrial Average continued their rise from March cornonavirus-lockdown-lows to come within 2%, 8% and 11%, respectively, of overtaking all-time closing highs registered in February.

The dollar index fell 0.24% against a basket of other currencies early on Thursday, having hit an 11-week low on Wednesday. The euro rose as high as $1.1251, a level not seen since March 12.

“Liquidity provision by central banks – and expectations that more is coming – is helping to support the recent drive in risk markets,” ANZ Research senior economist Liz Kendall and strategist David Croy, said in a note early on Thursday.

But the analysts cautioned asset prices would need a recovery in the global economy to sustain gains.

On Wednesday, the Dow rose 2.05%, the S&P 500 gained 1.36% and the Nasdaq Composite added 0.78%.

The pan-European STOXX 600 closed at its highest since March 6. European markets have performed strongly so far this week as several countries eased strict lockdown measures.

The move to riskier assets continued to take down prices for U.S. Treasuries. The yield on the benchmark 10-year reached 0.7333% on Wednesday, up from 0.667% on Tuesday.

A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, reached 55 basis points on Wednesday, the steepest level since mid-March. A steepening curve often points to a stronger economy.

Governments around the world have gradually started to lift tough lockdown measures imposed to contain the coronavirus which has infected nearly 6.4 million people and killed over 379,000.

Markets await Friday’s U.S. Labor Department May jobs report, which is expected to show unemployment soaring to a post-World War Two high of nearly 20% from 14.7% in April.

On Wednesday, a report showed that U.S. private payrolls fell less than expected in May, suggesting layoffs were abating as businesses reopen.

Investors are also focused on whether the European Central Bank will increase the size of its 750 billion euro ($669 billion) Pandemic Emergency Purchase Programme, when it meets on Thursday.

Oil prices rose again on Wednesday, briefly trading above $40 a barrel, the highest since March, and reflecting increased demand.

Brent crude futures for August settled up 22 cents, or 0.6%, at $39.79 a barrel. The session high of $40.53 was the highest since March 6. West Texas Intermediate (WTI) crude for July rose 48 cents, to $37.29 a barrel.

Spot gold added 0.1% to $1,698.39 an ounce early on Thursday after losing 1.6 % on Wednesday.

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EMERGING MARKETS-Brazil's real on a tear amid bleak outlook

    By Susan Mathew
    June 3 (Reuters) - Brazil's real surged 2.6% on Wednesday
after industrial output in the country fell less than expected,
while other Latin American currencies joined a rally in risk
assets on hopes of a strong economic recovery from a
pandemic-induced recession.
    Industrial production in Brazil fell 18.8% in April at its
fastest pace on record due to coronavirus containment measures,
but the drop was less than the estimated 29.2% slide.
 
    "It still highlights that GDP will fall dramatically in Q2 –
perhaps by 10-12% quarter on quarter," warned William Jackson,
chief emerging markets economist at Capital Economics.
    "It will also provide (the monetary policy committee) with
plenty of reason to cut interest rates further later this
month."
    The real extended gains after firming 3% on Tuesday.
The currency has been one of the most worst performing emerging
market currencies this year, but a recent bout of risk appetite
has lifted the real from record lows, even as pandemic and
political woes persist.
    Hopes of an economic recovery gained momentum as service
sector PMIs from some countries showed improvement as economies
restarted more businesses after a pandemic induced stall, while
the U.S. labor market appeared to stabilize as private payrolls
fall less than expected.
    Sao Paulo listed stocks extended gains to a fourth
session with beaten down airline stocks Azul and Gol
 among the top gainers. 
    Most other Latam stocks also rose, tracking Wall Street
higher, while currencies made strong gains against a weaker
dollar. 
    Chile's peso hit an over 4-month high as copper
prices rallied, while Mexico's peso rose for a fifth
straight session.     
    Argentina's debt restructuring saga continued. A prominent
group of the countries creditors said its restructuring proposal
was in line with an International Monetary Fund assessment of
what would be sustainable, and called for a deal to help the
country avoid a costly default. 
    
    Key Latin American stock indexes and currencies at 1355 GMT:
  Stock indexes           Latest   Daily %
                                   change
 MSCI Emerging Markets     985.00     1.81
                                   
 MSCI LatAm               1973.58     3.77
                                   
 Brazil Bovespa          93135.06     2.29
                                   
 Mexico IPC              37869.88     1.09
                                   
 Chile IPSA               3797.17     1.25
                                   
 Argentina MerVal               -        -
                                   
 Colombia COLCAP          1125.66     0.71
                                   
                                          
      Currencies          Latest   Daily %
                                   change
 Brazil real               5.0767     2.60
                                   
 Mexico peso              21.5760     0.95
                                   
 Chile peso                 766.5     1.79
                                   
 Colombia peso            3574.14     1.51
                                   
 Peru sol                  3.3768     0.53
                                   
 Argentina peso           68.8000    -0.12
 (interbank)                       
                                   
 
 (Reporting by Susan Mathew in Bengaluru;
Editing by Alistair Bell)
  

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Asian stocks set to gain as stimulus hopes support risk appetite

NEW YORK (Reuters) – Asian stocks were poised to follow the global rally on Wednesday as hopes of more government stimulus bolstered riskier assets and overshadowed a host of other worries from the coronavirus to Hong Kong and growing U.S. civil unrest.

E-mini futures for the S&P 500 were up 0.3% and Japan’s Nikkei 225 futures were 1.6% higher in Asia on Wednesday morning, while Australian S&P/ASX 200 futures rose 0.58% in early trading.

That comes after stocks in the United States, Europe and emerging markets hit their highest levels on Tuesday since early March and as bidding for riskier currencies pushed the dollar toward three-month lows and oil neared three-week highs.

From its March 23 low, MSCI’s gauge of stocks across the globe was up 35%. Despite lockdowns to control the COVID-19 pandemic, the global index is down year-to-date only about 8%.

U.S. stocks indexes rose about 1% even as the worst civil unrest in decades left dozens of cities under curfews following protests over the death of an unarmed black man in police custody.

With its gains, the U.S. tech-heavy Nasdaq Composite is down less than 3% from its pre-pandemic record highs.

“The good times continue to roll in risk markets,” Mazen Issa, senior FX strategist at TD Securities, said in a report. “As intense as the rally has been, this is likely set to continue as the breadth of the equity rally has now spread outside the U.S.”

The U.S. Treasury yield curve steepened, reflecting the sale of more government debt to finance massive stimulus efforts. The gap between yields on 5- and 30-year Treasuries reached 116 basis points on Tuesday, its highest since early 2017.

“A steepening curve does give equities a bit of a kick,” said Kim Rupert, senior economist for Action Economics.

Expectations for additional support from the European Central Bank and the German government boosted European stocks and the euro on Tuesday.

Volkswagen (VOWG_p.DE), Daimler and BMW, for example, gained more than 5% on confidence that Germany’s proposed 5 billion euro ($5.6 billion) stimulus package will boost car sales.

The ECB is expected to ramp up stimulative bond purchases when it meets on Thursday.

Oil prices climbed more than 3%, or $1 a barrel, on Tuesday on renewed U.S. demand for gasoline and hopes that major crude producers will agree this week to extend output cuts. U.S. West Texas Intermediate crude (WTI) settled at $36.81 and Brent crude settled at $39.57 a barrel.

Gold retreated 1% on Tuesday amid the broader optimism.

U.S. gold futures settled down 0.9% at $1,734.

Gold is still up more than 18% from a low of $1,450.98 in March because of the economic damage from the pandemic and the massive amounts of money coming from central banks.

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GLOBAL MARKETS-Asia stocks hit 3-month peaks, resilient to U.S. rioting

* Asian stock markets : tmsnrt.rs/2zpUAr4

* Asia markets swing higher, Nikkei at 3-mth peak

* China surveys show growth at home, subdued exports

* S&P 500 futures bounce, though riots add to economic woe

* Busy week sees ECB meet, U.S. payrolls report

By Wayne Cole

SYDNEY, June 1 (Reuters) – Asian shares pushed to three-month highs on Monday as progress on opening up 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 managed to rally 3.6%, while Chinese blue chips put on 2.4%.

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.

A private survey showed a return to growth in May, though exports remained depressed.

That helped lift MSCI’s broadest index of Asia-Pacific shares outside Japan 2.1% to its highest since early March. Japan’s Nikkei added 0.7% to also reach a three-month peak.

E-Mini futures for the S&P 500 recovered to be flat, having been down 1% in early trade. EUROSTOXX 50 futures firmed 1.4% and FTSE futures 1.1%.

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.

Early Monday, the dollar was 0.2% softer on a basket of peers at 98.018 having touched an 11-week low of 97.944 on Friday. It was also down on the yen at 107.52.

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 $1.1131, 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.

In commodity markets, gold added 0.9% to $1,1742 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 22 cents at $37.62 a barrel, while U.S. crude fell 19 cents to $35.30.

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Stocks rebound on relief at Trump's response to China over Hong Kong

NEW YORK (Reuters) – A gauge of global equities rebounded and crude oil rose on Friday after U.S. President Donald Trump ordered an end to Washington’s special treatment of Hong Kong, a move investors welcomed as unlikely to jeopardize a trade accord with China.

Trump said China broke its word over Hong Kong’s autonomy but did not mention any action that would undermine the Phase 1 trade deal that Washington and Beijing signed this year.

China’s parliament on Thursday passed new national security legislation for the city, casting doubt on its freedoms and its future as a finance hub.

U.S. stocks pared losses after Trump’s remarks and oil gained on hopes the dispute will not curb the economy’s nascent recovery from the coronavirus pandemic.

The Dow Jones Industrial Average .DJI fell 17.53 points, or 0.07%, to 25,383.11, the S&P 500 .SPX gained 14.58 points, or 0.48%, to 3,044.31 and the Nasdaq Composite .IXIC added 120.88 points, or 1.29%, to 9,489.87.[.N]

Investors were worried about a further deterioration in Sino-U.S. relations, which have soured considerably through the COVID-19 pandemic.

“The market was worried he was going to announce something substantial, something detrimental to the U.S. economy. Then as he spoke it became clear the actions being taken were not going to be as dramatic as originally feared,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

MSCI’s gauge of stocks across the globe .MIWD00000PUS gained 0.05%. In Europe, the pan-regional STOXX 600 index lost 1.44%.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.2%. Japan’s Nikkei .N225 retreated from a three-month high and the yen rose to a two-week high of 107.06 against the dollar, while bonds rose.

The Chinese yuan CNY= weakened in offshore trade. [CNY/]

Hong Kong’s Hang Seng index .HSI declined 0.8% and has lost about 3% in the two weeks since news of China’s security legislation broke. [.HK]

The yield on benchmark 10-year U.S. Treasury notes US10YT=RR fell 0.651 basis points to 0.6526%.

Federal Reserve Chair Jerome Powell on Friday reiterated the U.S. central bank’s promise to use its tools to mitigate economic fallout from the pandemic, even investors were turning their attention to the next phase of its response.

MAY RALLY

Massive amounts of government stimulus helped lift global stocks in May, offsetting reams of grim economic data.

Equity markets have had difficulty gauging the pandemic’s impact on earnings. But data on Friday showed a record drop in U.S. consumer spending for the second straight month and the highest-ever saving rate, reflecting high levels of economic uncertainty.

Investors have been buying stocks as lockdowns have been lifted or eased, betting on a speedy recovery.

The S&P 500 .SPX gained around 4% for the month, making it the best May since 2009.

MSCI’s All Country World Index .MIWD00000PUS, which tracks stocks across 49 countries, was up around 3.5% this week – its best weekly performance since April.

The euro EUR= climbed above its 200-day moving average for the first time since late March as the European Union’s 750 billion-euro coronavirus recovery fund fueled optimism. [FRX/] It was up 1.3% month-to-date against the greenback, last trading at $1.1097.

The dollar index =USD fell 0.178%against a basket of currencies.

U.S. gold futures GCv1 settled up 1.4% at $1,751.70 an ounce.

U.S. crude oil prices jumped more than 5%, while Brent, the international benchmark, edged higher. U.S. crude futures CLc1 rose $1.78 to settle at $35.49 a barrel, while Brent CLOc1 settled up 4 cents at $35.33 a barrel. [O/R]

Both contracts had their biggest monthly gains in years, supported by production cuts and optimism about demand recovery led by China.

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Stocks gain as German survey fuels optimism; dollar firm

LONDON (Reuters) – Stocks edged higher on Monday after a survey showed German business morale rebounded in May, boosting optimism around economic re-openings, although caution prompted the dollar to snap a rare losing streak.

MSCI’s gauge of world stocks gained 0.32%. The pan-European STOXX 600 index climbed 0.8%.

Lockdown measures introduced in mid-March have put the global economy on track for a recession this year. Only unprecedented stimulus by global central banks held up world markets in recent weeks.

With nervous investors wary of adding to their equity holdings over concerns on what a post-lockdown world would look like, Germany’s Ifo institute survey for May gave some relief.

Its business climate index rose to 79.5 from a downwardly revised 74.2 in April, higher than a Reuters poll had forecast, and fueling optimism about the outlook of Europe’s biggest economy after a drop in the first quarter

“Today’s Ifo index echoes more real-time signals that economic and social activity has started to pick up significantly since the first lifting of the lockdown measures in late April,” ING economists said in a note.

“In short, the low point of the slump should now be behind us and there even is the chance for a short-lived strong rebound in the coming months.”

But with financial markets in Singapore, Britain and the United States closed for public holidays on Monday, market moves were relatively small and held within well-worn ranges.

U.S. stock futures gained 1%. MSCI’s index of Asia-Pacific shares outside Japan was 0.3% higher on thin volume.

DOLLAR GAINS

The bullishness in the stock markets contrasted with caution in currency markets, where the dollar ended a rare weekly loss to rise to a one-week high against its rivals.

The dollar, which tends to behave like a safe-haven asset during market turmoil and political uncertainty, gained after China’s move to impose a new security law on Hong Kong heightened concerns about the stability of the city and global trade prospects.

Investors were rattled on Friday when Beijing announced details of the security legislation, which critics see as a turning point for the territory.

Sino-U.S. ties have worsened since the coronavirus outbreak, with the administrations of President Donald Trump and President Xi Jinping trading barbs over the pandemic, including accusations of cover-ups and lack of transparency.

“Rising tensions between the U.S. and China around Hong Kong, trade policy and who is responsible for the 2020 economic dislocation are threatening to end the post March-trough rally,” said Perpetual analyst Matthew Sherwood.

Bond markets were stable with Italy’s 10-year yield at 1.60%, just off six-week lows hit on Friday, and safe-haven German 10-year yields down 1 basis point at -0.50%.

Meanwhile, U.S. crude oil rose 32 cents, or 1%, to $33.57 a barrel. Brent crude was up 9 cents, or 0.26% higher, at 35.22. [O/R]

Spot gold was off 0.3% at $1,729.2 an ounce.

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CEE MARKETS-Stocks fall as new data reveals scale of virus hit

    By Anita Komuves
    BUDAPEST, May 21 (Reuters) - Central European stock markets
eased on Thursday as markets around the world switched into
risk-off mood and fresh data in the region showed the
devastating effects of the pandemic, with Polish industrial
output dropping 24.7% year-on-year in April.
    The export-driven economies of the CEE region have been hit
hard by the lockdown measures introduced to curb the spread of
the coronavirus.
    The International Monetary Fund forecast that economies in
the region will contract by 3% to 7% this year due to the
pandemic.
    Equities in the region were down with Prague's blue chip
index leading losses by dropping 0.74% by 0726 GMT. Warsaw
 was down 0.4% while Budapest eased 0.3%.
Bucharest's stock market was down 0.2%. 
    Currencies were mostly stable with the Czech crown firming
0.3% to 27.230 versus the euro. The Polish zloty and the
Romanian leu were little moved.
    The Hungarian forint firmed 0.06% to 349.650 against the
euro. The currency has been trading near the 350 level for the
past few sessions.    
    "The international mood and possible further steps from the
NBH could give a new direction to the forint," an FX trader in
Budapest said.
    "Many people expect policy loosening from the central bank
sooner or later, a lowering of the interest rate on the one-week
deposit tender, or that the bank accepts a smaller amount of
bids to boost liquidity," he added.  
    The NBH holds its one-week deposit tender later today. The
NBH has been offering the facility at the 0.9% since it was
introduced.
    In a Reuters poll some economists said the bank might lower
the interest rate on the facility later this year if the forint
remains stable and the scale of damage to the economy from the
pandemic gets clearer.
    
** For an interactive graphic on CEE economic developments: reut.rs/3exsJHO
    
                   CEE      SNAPSHO   AT                      
                   MARKETS  T        0926              
                                     CET               
                            CURRENC                           
                            IES                        
                            Latest   Previou  Daily    Change
                                     s                 
                            bid      close    change   in 2020
 EURCZK  Czech     <EURCZK  27.2300  27.3200   +0.33%   -6.60%
 =       crown     =>                                  
 EURHUF  Hungary   <EURHUF  349.650  349.850   +0.06%   -5.29%
 =       forint    =>             0        0           
 EURPLN  Polish    <EURPLN   4.5349   4.5352   +0.01%   -6.14%
 =       zloty     =>                                  
 EURRON  Romanian  <EURRON   4.8440   4.8434   -0.01%   -1.15%
 =       leu       =>                                  
 EURHRK  Croatian  <EURHRK   7.5750   7.5765   +0.02%   -1.71%
 =       kuna      =>                                  
 EURRSD  Serbian   <EURRSD  117.530  117.570   +0.03%   +0.03%
 =       dinar     =>             0        0           
         Note:     calculated from            1800            
         daily                                CET      
         change                                        
                                                              
                            Latest   Previou  Daily    Change
                                     s                 
                                     close    change   in 2020
 .PX     Prague              872.10  878.570   -0.74%  -21.83%
                                           0           
 .BUX    Budapest           35535.4  35635.5   -0.28%  -22.89%
                                  8        2           
 .WIG20  Warsaw    <.WIG20  1646.26  1652.64   -0.39%  -23.43%
                   >                                   
 .BETI   Buchares           8403.91  8419.75   -0.19%  -15.77%
         t                                             
 .SBITO  Ljubljan  <.SBITO   809.74   809.74   +0.00%  -12.54%
 P       a         P>                                  
 .CRBEX  Zagreb    <.CRBEX  1581.30  1581.30   +0.00%  -21.62%
                   >                                   
 .BELEX  Belgrade  <.BELEX   673.50   673.50   +0.00%  -15.99%
 15                15>                                 
 .SOFIX  Sofia     <.SOFIX   448.91   449.45   -0.12%  -20.99%
                   >                                   
                                                              
                            Yield    Yield    Spread   Daily
                            (bid)    change   vs Bund  change
                                                       in
         Czech                                         spread
         Republic                                      
 CZ2YT=    2-year  <CZ2YT=   0.1250  -0.0080   +080bp    +0bps
 RR                RR>                              s  
 CZ5YT=    5-year  <CZ5YT=   0.3750  -0.0770   +104bp    -8bps
 RR                RR>                              s  
 CZ10YT            <CZ10YT   0.8280   0.0370   +131bp    +5bps
 =RR     10-year   =RR>                             s  
         Poland                                               
 PL2YT=    2-year  <PL2YT=   0.5410  -0.0230   +122bp    -2bps
 RR                RR>                              s  
 PL5YT=    5-year  <PL5YT=   0.9330   0.0000   +160bp    +0bps
 RR                RR>                              s  
 PL10YT            <PL10YT   1.3850   0.0000   +186bp    +1bps
 =RR     10-year   =RR>                             s  
                   FORWARD                                    
                            3x6      6x9      9x12     3M
                                                       interba
                                                       nk
         Czech     <CZKFRA     0.23     0.24     0.25     0.34
         Rep       ><PRIBO                             
                   R=>                                 
         Hungary   <HUFFRA     0.87     0.83     0.79     1.01
                   ><BUBOR                             
                   =>                                  
         Poland    <PLNFRA     0.40     0.37     0.37     0.68
                   ><WIBOR                             
                   =>                                  
         Note:     are for ask                                
         FRA       prices                              
         quotes                                        
 

 (Editing by Giles Elgood)
  
 
 

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