Equities, crude surge in Asia on hopes for treatment of Covid-19

EUROPEAN stock markets retreated on Thursday following solid gains in Asia, while oil prices surged further, as extremely weak economic data offset news of a possible breakthrough in the search for a Covid-19 treatment.

The EU economy shrank 3.5 per cent in the first quarter, official data from the European Central Bank (ECB) showed, the first major indication of the devastation facing the bloc as a result of coronavirus.

Separate figures revealed that the jobless total in Europe’s biggest economy Germany soared 13.2 per cent last month.

“The ECB’s meeting will be in focus today, and dealers will looking to see if the central bank is wholeheartedly committed to assisting the eurozone in this time of huge uncertainty,” said David Madden, analyst at CMC Markets UK.

“Last night, the Fed [US Federal Reserve] made it clear they are willing to do what it takes to overcome the crisis, so the standard has been set for the ECB.”

Top US epidemiologist Anthony Fauci said Gilead Science’s remdesivir “has a clear-cut, significant, positive effect in diminishing the time to recovery”.

His comments fanned hopes that lockdowns – already being loosened in some nations – could be lifted more quickly, allowing people back to work to kickstart the battered economy.

The announcement allowed investors to look past data showing the US economy had contracted 4.8 per cent in the first quarter, its worst performance in a decade, and the Fed’s warning that it would likely tank even further in April-June.

The central bank did provide some support, though, by pledging to keep interest rates at zero until the economy has weathered the crisis and is ready to resume growth. On Thursday, France said i t s economy had fared even worse and contracted 5.8 per cent.

Wall Street and Europe’s main indexes all rose at least two per cent, and Asian equities – already enjoying a bright week on signs of an easing in the virus – took up the baton on Thursday.

Tokyo returned from a oneday holiday to end 2.1 per cent higher, while Sydney, Singapore and Taipei also piled on more than two per cent.

Mumbai and Jakarta jumped more than three per cent, with Shanghai, Manila and Bangkok breaking the one per cent mark, though Wellington dropped more than one per cent. The Cambodia Securities Exchange gained 1.17 per cent.

Hong Kong and Seoul were closed for public holidays. In early trade, London, Paris and Frankfurt advanced.

“One of the main reasons for the strong recovery in risk sentiment . . . is the homogeneity of the recession’s driver,” said AxiCorp’s Stephen Innes.

“Compared to previous downturns that were more multifaceted and professedly more difficult to unwind, the eradication of the single recessionary input – the virus – via a vaccine can cobblestone the way for an expeditious recovery in global economic output.”

On crude markets, both main contracts soared for a second day – with West Texas Intermediate’s 15-per cent gain adding to a 25 per cent advance on Wednesday – thanks to the news on remdesivir as well as figures showing a slower-than-expected rise in US stockpiles.

There were also signs that demand may be improving with weekly petrol supply rising by 549,000 barrels a day in the US, the most since May last year, Bloomberg News reported.

The gains were much needed after the commodity was hammered last week by worries over almost non-existent demand and a lack of storage facilities, which offset a massive cut in output by major producers.

Edward Moya, of Oanda, said: “Oil prices will continue to play ping-pong here, but continued optimism on the virus front will do wonders, improving both economic activity and crude demand forecasts.

“The next few weeks could get ugly again fairly quickly for oil prices, but energy markets might see volatility ease if steady production-cut announcements occur across the globe.”