The IMF estimates that by the end of this year 170 countries will have lower per capita income. Before the pandemic, back in January, it had predicted that 160 countries would end the year with bigger economies and positive per capita income growth. European and US stocks are pointing to a buoyant start to the week, following Asian equities higher as investors weigh up the potential for ongoing monetary policy support with a growing number of virus cases. Market activity was subdued after the July 4 long weekend holiday in the United States but the S&P 500 still firmed 0.8%, while EUROSTOXX 50 added 1.8%. FTSE advanced 1.5% following reports that the UK is considering raising the threshold at which homebuyers pay stamp duty. Most markets had gained ground last week as a raft of economic data from June beat expectations, though the resurgence of coronavirus cases in the United States is clouding the future. Investors are weighing a global equity market that remains about 40% above its March lows amid an economic recovery under threat from the continuing spread of the virus.
Asian shares scaled four-month peaks today as investors counted on super-cheap liquidity, fiscal stimulus and a revival in Chinese activity to sustain the global economic recovery, even as surging coronavirus cases delayed re-openings across the United States. Eyes were on Chinese blue chips which jumped 3%, on top of a 7% gain last week, to their highest level in five years. The yuan drew strength from a jump in Chinese share prices to the highest in five years as investors shrugged off concerns about diplomatic tension between the United States and China. It rose to 7.0490 per dollar, the highest since April 30.
The euro will come into focus later in the trading day as Germany, the euro zone’s largest economy, is scheduled to release industrial orders for May. Retail sales for all of the eurozone will also be released later on today. Both indicators are forecast to recover strongly from large declines caused by the spread of the coronavirus. In France, President Emmanuel Macron disposed of his prime minister after a disastrous showing in local elections while Spanish authorities imposed a second lockdown for a Northwestern region. The single currency rose to $1.1289 against the US dollar and 90.42 pence against the British pound. The Japanese yen also fell shedding 0.5% against the euro to 121.45.
A steady rise of new coronavirus infections in the United States has discouraged some investors from taking big positions in the currency market, but most market participants remain focused on the growing likelihood that major economies will continue to recover. The dollar held steady against most currencies as investors awaited data expected to show the US services sector stopped contracting. The Japanese yen fell against most major currencies as gains in Asian share prices encouraged some riskier trades. The dollar edged up to 107.55 yen following a 0.3% gain last week. Sterling moved in a narrow range at $1.2488. Against the Swiss franc, the dollar dipped to 0.9429. The Japanese yen fell around 0.5% against the Australian and New Zealand dollars as risk sentiment improved. However, the yen could quickly reverse course given the uncertainty surrounding the coronavirus. Spot gold traded at $1,776 per ounce just off last week’s peak of $1,788.96. In commodity markets, gold has benefited from super-low interest rates across the globe as negative real yields for many bonds make the non-interest paying metal more attractive.