Stocks rally, S&P 500 crosses 3,000 barrier; oil gains

NEW YORK/LONDON (Reuters) – Global equity and crude oil markets rose on Tuesday as investors focused on China’s promise of more stimulus and prospects of a world economic recovery, allowing them to push aside concerns that U.S.-China rhetoric could threaten a trade deal between the world’s two largest economies.

The euro got a boost from a weaker dollar as rising optimism about the easing of lockdowns to stem the coronavirus pandemic supported riskier currencies and sent safe-haven gold lower.

Crude prices rose on growing confidence that producers are following through on commitments to cut supplies and as fuel demand picks up as coronavirus lockdowns ease.

MSCI’s gauge of stock performance in 49 countries surged more than 2%, as did its emerging markets index. The S&P 500 climbed past the 3,000 mark for the first time since March 5, up 37% from March lows but still off about 11% from its all-time high in February.

Europe was powered by a 6.9% surge in travel and leisure stocks .SXTP. On Wall Street, shares of American Airlines (AAL.O), United Airlines Holdings (UAL.O) and U.S.-listed cruise ship operators jumped more than 13%.

The major driver of positive investor sentiment is the reopening of the U.S. and global economies, said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group Inc in New York.

“Reports of economic activity, while still terrible compared to three months ago, have begun to get less bad as compared to the prior month. This suggests the economy has bottomed and may be starting to rebound off its lows,” Benowitz said.

Spain said quarantine-free tourism would resume next month and Germany edged toward a 9 billion-euro bailout of airline Lufthansa.

Spain’s Melia Hotels International SA (MEL.MC) rose 13.6% and France’s Accor SA (ACCP.PA) 11.3%, the biggest percentage gainers on the Spanish and French bourses. Norwegian Cruise Line Holdings Ltd (NCLH.K), Carnival Corp (CCL) and Royal Caribbean Cruises Ltd (RCL.N) were among the top six percentage gainers on the S&P 500.

But the travel industry remained vulnerable. Latin America’s largest airline, LATAM Airlines Group (LTM.SN), and its affiliates in Chile, Peru, Colombia and Ecuador filed for bankruptcy protection in the United States.

MSCI’s all-country world index .MIWD00000PUS gained 1.95%, and the pan-European STOXX 600 index rose 1.08%.

The Dow Jones Industrial Average .DJI rose 642.5 points, or 2.63%, to 25,107.66. The S&P 500 .SPX gained 53.34 points, or 1.80%, to 3,008.79 and the Nasdaq Composite .IXIC added 70.31 points, or 0.75%, to 9,394.90.

While some investors believe equities are getting ahead of valuations, with economic conditions worse than the last time the S&P 500 advanced past 3,000 and a potential resurgence in COVID-19 cases, stock prices are forward-looking, Benowitz said.

“It seems likely that the economic recovery will not be smooth,” he said. “We also expect growth to resume and corporate earnings to advance well off their lows in the next few years.”

Crude prices were buoyed by Russia’s saying its oil output had dropped close to its target of 8.5 million barrels per day for May and June under the supply deal reached by major producers.

Brent futures LCOc1 rose 64 cents to settle at $36.17 a barrel, while U.S. crude CLc1 settled up $1.10 at $34.35.

China’s central bank said it would continue to push to lower interest rates on loans, helping offset tensions between Beijing and Washington over trade, the coronavirus and Chinese proposals for stricter security laws in Hong Kong.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS advanced 1.7% overnight, with South Korea .KS11 up 1.75% and Chinese blue chips .CSI300 1.1% higher.

The dollar index =USD fell 0.809%, with the euro EUR= up 0.82% to $1.0988. The Japanese yen JPY= strengthened 0.15% versus the greenback at 107.56 per dollar.

Benchmark U.S. 10-year Treasury notes US10YT=RR rose 3.9 basis points to yield 0.6981%.

U.S. gold futures GCv1 settled down 1.7% at $1,705.60 an ounce. Spot gold XAU= dropped 1.0% to $1,712.48.

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