European stocks and US futures turned higher on Monday, as investors bet that an acceleration in new coronavirus infections would not derail the economic recovery.
The continent-wide Euro Stoxx 600 erased earlier losses to rise 0.2 per cent by mid-morning trading, while London’s FTSE 100 was flat.
Shares on Wall Street were set for a positive start to the week, as S&P 500 futures pointed to a gain of 1 per cent when trading begins later on Monday.
Investor sentiment in recent sessions has been damped by a steep increase in new Covid-19 cases in the Americas, Europe and Asia, although analysts said there are few signs of any new economically stifling lockdowns.
“While investors are cognisant of second wave risks, their outlook for markets is more sanguine,” credit strategists at Bank of America said, adding that their clients saw limited political appetite for a return to lockdowns.
“So far there seems to be little evidence of widespread fear, either from consumers or from policymakers,” said Paul Donovan, chief economist at UBS Global Wealth Management.
Frankfurt’s Xetra Dax rose 0.4 per cent, after falling at the open as an outbreak at an abattoir in Germany pushed its reproduction number up to 2.88 on Sunday. A number above 1 means the outbreak is expanding.
“The losses are being contained since officials have so far dismissed the idea of another full lockdown,” said Jasper Lawler, head of research at London Capital Group.
The US reported 27,465 new cases as of the end of Sunday with a recent jump in infections in the southern and western parts of the country showing little sign of slowing down.
Sprawling stimulus measures from central banks helped stocks continue their strong rally last week, but the move by Apple and the rise in new cases over the weekend has left investors focused on the risk that measures will need to be re-enacted to slow the spread of the virus.
In Asia-Pacific trading on Monday, Hong Kong’s Hang Seng was down 0.5 per cent and Seoul’s Kospi declined 0.7 per cent. Stock benchmarks in mainland China and Sydney were flat while Tokyo’s Topix index fell 0.2 per cent.
Chinese officials appear to be controlling an outbreak in Beijing, where there were nine new cases reported as of the end of Sunday, down from 22 a day earlier. Meanwhile, some coronavirus restrictions have been reintroduced in the Australian state of Victoria following a rise in cases.
Strategists at Morgan Stanley said that China’s decision to lock down parts of the capital to contain the latest outbreak “may prove to be a better response for the purposes of economic growth over the medium term”.
“Quick, decisive action to contain hotspots is likely to feed into greater consumer confidence over time,” they added. “It should allow businesses to remain open for longer, for a given period of time, than the alternative.”
The US dollar dropped 0.4 per cent against a basket of currencies, stepping back from its recovery in the past two weeks.
Oil prices pulled back after a solid week in which Brent crude, the international benchmark, settled above $42 a barrel. On Monday, Brent was up 0.3 per cent at $42.32 a barrel while US marker West Texas Intermediate was flat at $39.75.