World shares see slim gains as lockdowns ease and oil rises
World shares eked out slim gains on Wednesday, with optimism over economies easing coronavirus lockdowns and rebounding oil prices leavened by a mixed picture on corporate earnings.
MSCI’s world equity index, which tracks shares in 49 countries, ticked up 0.1%, with European shares flat by late morning in choppy trading.
Wall Street futures were up 0.7%, helped by forecast-beating revenues from Alphabet’s Google.
The broad Euro Stoxx 600 lost grounds as defensive stocks — sectors such as healthcare and personal and household goods — dropped between 1% and 1.7%.
Major drugmakers Roche and Novartis fell 2.5% and 1.4% respectively, balanced by gains for BP, Total and Royal Dutch Shell as crude prices climbed as much as 15%.
Major indices were varied: Frankfurt gained 0.3% while Paris slipped 0.4%. London’s benchmark rose 0.7%, boosted by gains for lenders Barclays and Standard Chartered.
“The market is broadly buying stocks on the hope of the recovery and focusing on the eventual winners of this part of the cycle related to Covid-19, and then the structural winners,” said Sebastien Galy, a strategist at Nordea.
Riskier assets, including equities, have rallied for most of this month thanks to heavy doses of fiscal and monetary policy stimulus around the globe aimed at softening the economic blow from the Covid-19 pandemic.
Investors across the world are growing confident that the pandemic may be peaking as parts of the US, Europe and Australia gradually ease restrictions. New Zealand allowed some businesses to re-open this week.
Still, Europe’s quarterly results have continued to deteriorate, with Refinitiv data pointing to a 40.4% decline in earnings for companies listed on the Stoxx 600, compared to 37% a week ago.
Airbus posted a 49% slump in first-quarter core profit, with planemakers, airlines and suppliers having been left reeling by the pandemic.
Some bright spots were evident, though.
German carmaker Volkswagen (VW) said it expects a full-year profit even after a plunge in first-quarter earnings and Daimler was also eyeing an operating profit for its Mercedes-Benz cars and vans unit.
Earlier, MSCI’s broadest index of Asia-Pacific shares excluding Japan gained 1% to a near two-month peak.
Hopes that the moves will help revive energy demand sent US crude futures up about 15% to $14.12 a barrel, paring a 27% plunge over the first two days of this week. Brent crude futures rose 5% to $21.47 a barrel.
The moves also emboldened bets on riskier currencies, keeping the dollar on the back foot, falling 0.1% to 99.760 against a basket of currencies. The euro was flat at $1.0860, though the euro index eased after Fitch cut Italy’s credit rating to BBB-, just one notch above junk status. Italy’s government bond yields rose after the cut.
Some analysts were circumspect about the rally in stocks, noting a concentration among tech and IT stocks.
“We were actually seeing a big dislocation in performance in the new world — the tech thing — and the old economy of industrials reliant on human costs,” said Olivier Marciot, portfolio manager at Unigestion.
Investors are now watching out for results from the other major tech firms, including Amazon and Apple. Earnings from Facebook and Microsoft are due later in the day.
The gains have come even as analysts predict a sharp contraction in world growth. Moody’s expects economies of the G20 nations to shrink 5.8% this year with momentum unlikely to recover to pre-coronavirus levels even in 2021.
Markets are next looking for any guidance from the US Federal Reserve, which is due to issue a policy statement at about 6pm GMT after its two-day meeting. The European Central Bank (ECB) meets on Thursday.
Analysts said it is unlikely the Fed would make further major policy moves, given the scope and depth of its efforts to counter the economic damage caused by the coronavirus.