LONDON: Coronavirus treatment hopes nurtured risk assets on Monday, lifting stocks for a second straight session and weighing on safe-haven Bunds, while markets geared up for the U.S. Federal Reserve’s annual Jackson Hole meeting later in the week.
Europe’s pan-regional STOXX 600 rose 1.8% – its biggest daily gain in nearly three weeks – and the global equity benchmark added 0.6% after U.S. regulators authorised the use of blood plasma from recovered patients as a treatment option.
Their advance came on the heels of healthy gains in Asia, where MSCI’s broadest index of Asia-Pacific ex-Japan shares jumped 0.8% to flirt with last-week’s six-month high and Japan’s Nikkei added 0.3%.
U.S. futures indicated almost a 1% gain on Wall Street ahead, raising the prospect of another record high for the S&P 500 .
Markets latched onto an announcement from the U.S. Food & Drug Administration for an “emergency use authorisation” which will allow the use of blood plasma from patients who have recovered from COVID-19 as a treatment for the disease.
The announcement came on the eve of the Republican National Convention, where Donald Trump will be nominated as the party’s candidate for the presidency for four more years.
Sentiment was also supported by a Financial Times report that the Trump administration is considering by-passing normal U.S. regulatory standards to fast-track an experimental coronavirus vaccine from the UK for use in the United States before the presidential election in November.
“Vaccine news are giving equities another global boost, despite the worsening in infection rates observed in many jurisdictions,” said Citi’s Luis Costa.
Coronavirus infection rates have been creeping up again in various parts of the world, especially European countries.
“In spite of its relative success in suppressing the first wave of the virus, it’s Europe that’s begun to re-emerge as a source of concern in recent days given the latest rises in case numbers, a trend that continued through the weekend,” said Henry Allen at Deutsche Bank.
Looming large over this week was an address by Federal Reserve Chair Jerome Powell at the Kansas City Fed Jackson Hole symposium, where he will speak on the Fed’s monetary policy framework review.
“Fed chair Powell will speak (virtually) on the Fed’s Policy Framework Review, and we see a possibility for the Fed to shift to an average inflation target or at the least change its wording regarding inflation overshooting the target,” SEB’s Lina Fransson said in a note to clients.
The risk-on mood also filtered through to fixed-income markets with safe-haven German bond yields ticking up after falling for six consecutive sessions last week, the longest decline since January.
In currency markets, the dollar index slipped and the greenback weakened against the safe-haven Japanese yen at 105.80.
The British pound strengthened a touch to $1.3127 after declining 0.9% on Friday on lack of progress in post-Brexit trade talks with the European Union.
The euro gained 0.4% to stand at 1.1842 to the dollar, making up most of Friday’s 0.5% losses when the common currency was hit by disappointing manufacturing activity data.
Storms bearing down on the Gulf of Mexico, shutting more than half its oil production, helped push up crude oil futures. Brent rose 34 cents to $44.69 a barrel and U.S. crude climbed 31 cents to $42.65.
However, gold recovered from early losses to trade 0.6% higher at $1,950.01 an ounce.
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