S&P Futures Jump, Global Markets Rise In Holiday-Muted Session

US equity futures jumped in thin holiday volume, rising alongside European and Asian markets, and are now less than 20 points away from 3,000 having put the key resistance level of 2,950 in the rear view mirror, as investors cheered the reopening of more economies while ignoring the rapid deterioration in US-China relations which has put the fate of Hong Kong on the line. The dollar was flat despite the weakest yuan fixing in 12 years, while oil recovered modest overnight losses.

MSCI’s gauge of world stocks gained 0.32%. The pan-European STOXX 600 index climbed 0.8%, with European markets green across the board, after a survey showed German business morale rebounded in May, boosting optimism around economic re-openings, although caution prompted the dollar to snap a rare losing streak.

With nervous investors wary of adding to their equity holdings over concerns on what a post-lockdown world would look like, Germany’s Ifo institute survey for May gave some relief. Its expectations index rebounded strongly to 80.1, from 69.4 last month, beating expectations of 75.0, while the business climate index rose to 79.5 from a downwardly revised 74.2 in April, also higher than forecast, and fueling optimism about the outlook of Europe’s biggest economy after a drop in the first quarter.

“Today’s Ifo index echoes more real-time signals that economic and social activity has started to pick up significantly since the first lifting of the lockdown measures in late April,” ING economists said in a note. “In short, the low point of the slump should now be behind us and there even is the chance for a short-lived strong rebound in the coming months.”

Construction and healthcare shares led a broad advance in the Euro Stoxx Index, with Bayer AG (BAYRY) jumping almost 9% after Bloomberg reported it reached agreements to resolve some cancer lawsuits over its Roundup weedkiller.

In Asia, the MSCI’s index of Asia-Pacific shares outside Japan was 0.3% higher on thin volume, as stocks gained led by industrials and health care, after falling in the last session. Hong Kong shares inched higher after Friday’s slump, following police clashes at the weekend with protesters marching against China’s move to crack down on dissent. All markets in the region were up, with Australia's S&P/ASX 200 gaining 2.2% and Japan's Topix Index rising 1.7%. The Topix gained 1.7%, with W-Scope and Showcase Inc/Japan rising the most. The Shanghai Composite Index rose 0.1%, with Danhua Chemical Technology and Beijing Sanyuan Foods posting the biggest advances

Contracts on all three major US indexes also rose, but with markets in Singapore, Britain and the United States closed for public holidays on Monday, market moves were relatively small and held within well-worn ranges. Emini futures gained 1%.

Volumes may be light with holidays in the U.S., U.K. and Singapore. Treasuries weren’t trading, and futures on the 10-year note were little changed. Elsewhere, bond markets were stable with Italy’s 10-year yield at 1.60%, just off six-week lows hit on Friday, and safe-haven German 10-year yields down 1 basis point at -0.50%.

In FX, China set its daily yuan (CYB) reference rate at the weakest level since 2008 after the increasing acrimony drove the currency to a seven-month low on Friday. A benchmark of emerging-market stocks headed for its first rise in three sessions.

The bullishness in the stock markets contrasted with caution in currency markets, where the dollar ended a rare weekly loss to rise to a one-week high against its rivals in early trading, but has since given up much of the gains. The dollar gained after China’s move to impose a new security law on Hong Kong heightened concerns about the stability of the city and global trade prospects.

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