Stocks post cautious gains

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SINGAPORE- Asian stocks ended higher on Tuesday as investors’ focus on the prospects of a global coronavirus recovery won out over familiar worries about Sino-US relations and the depth of economic damage.

Hampering broader global risk appetite, however, was US President Donald Trump’s vow to use force to end violent protests in American cities, which kept Wall Street stock futures negative in Asia.

MSCI’s broadest index of Asia-Pacific shares outside Japan, which had its best day in two months on Monday, extended its rally without panache – rising 0.3 percent. The dollar nursed heavy losses, but steadied, and bonds firmed.

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The week had begun with a surge in riskier currencies and global equities after Trump’s response to China’s tightening grip on Hong Kong – with threats, not tariffs – was seen lowering the temperature of Sino-US tension.

Reports of an order from China’s government to halt US soybean purchases, though, again raised the spectre of damaging trade disagreements between Washington and Beijing.

“There’s increasing concern about further deterioration in relations between China and the US,” said Michael McCarthy, chief market strategist at brokerage CMC Markets in Sydney.

“In the meantime, we’re hanging in there…but I think we might be getting a little exhausted given the giddy heights that we’re trading at.”

World stock markets have rallied nearly 36 percent from March lows on hopes for a swift recovery from a pandemic that has killed nearly 375,000 people and crushed global growth as countries have shut down to try and slow the virus’ spread.

May Purchasing Managers Index (PMI) data pointed to fragile but encouraging rebound in global manufacturing – driving hopes that the worst is over.

Japan’s Nikkei rose 1 percent to its highest since late February and markets in Seoul, Taipei and Hong Kong also gained.

“This optimistic read for risk can only persist if measures like orders and employment continue to improve month to month,” said Alan Ruskin, chief international strategist at Deutsche Bank.

“Early setbacks would be a very poor sign, but are not expected in the period immediately following the end of lockdowns.”

Currency and bond markets took a breather, and the safe-haven dollar scraped from multi-month lows against most major currencies and pushed bond yields lower.

The Australian and New Zealand dollars each dipped 0.3 percent after strong Monday gains and the dollar was a fraction over an 11-week low against a basket of currencies.

The yield on benchmark 10-year US Treasuries fell about 1 basis point to 0.6526 percent.

The wave of outrage in the United States following the death of George Floyd, who died in Minneapolis after being pinned beneath a white police officer’s knee for nearly nine minutes, seems yet to weigh on global investors’ sentiment.

Still, the unrest has dozens of US cities under curfew, racial tensions at boiling point and some analysts worrying it presents yet another hurdle to national economic recovery, or even invites a second wave of coronavirus infections. US stock futures were off 0.5 percent in Asian trade.

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