TOKYO/NEW YORK (Reuters) – Asian shares and U.S. stock futures rose on Thursday as growing optimism about economic recovery from the coronavirus pandemic trumped immediate concerns about a standoff between the United States and China over Hong Kong.

MSCI (NYSE:MSCI)’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was up 0.5%.

Australian shares (AXJO) rose 1.86% to the highest in more than two months, while Japan’s Nikkei stock index (N225) rose 1.28% to the highest since early March as investors cheered the re-opening of economic activity in both countries.

U.S. stock futures, S&P 500 e-minis (ESc1), rose 0.36% on Thursday in Asia following another positive session on Wall Street overnight, highlighting the positive mood.

However, the biggest risk to equities is the Sino-U.S. relationship, which is likely to worsen after U.S. Secretary of State Mike Pompeo that Hong Kong no longer warranted special treatment under U.S. law.

“The overall tone is support of risk-on trades, and we can see less short-selling and more willingness to test the upside in equities,” said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.

“There remains a fair amount of concern about Hong Kong, but for now markets look like they will remain calm.”

The S&P 500 (SPX) had closed above 3,000 for the first time in almost 12 weeks, bolstered by bank stocks, as investors hoped that the world economy can recover as it re-opens. (N)

The S&P 500 has leapt about 36% since the global coronavirus pandemic dragged it to the year’s low on March 23, but there are concerns the rally may be overdone and susceptible to a protracted pullback.

Futures for shares in Hong Kong (HSIc1) fell 0.74%, suggesting some investors remain cautious.

Pompeo said overnight that China had undermined Hong Kong’s autonomy so fundamentally that the territory no longer warranted special treatment, a potentially big blow to the city’s status as a financial hub.

Some investors worry a punitive U.S. response to China on the issue of Hong Kong could result in a tit-for-tat reaction from Beijing, further straining ties between the world’s two biggest economies and further hobbling global growth.

Bond investors seemed to agree more circumspection is needed. Ten-year U.S. yields (US10YT=RR) dipped to 0.6770% from 0.6802% overnight. Although 10-year yields are up from an all-time low of 0.4980% struck in March, they are still a whopping 120 basis points below highs seen in January.

President Donald Trump will now decide how many U.S. economic privileges Hong Kong should still enjoy. Sources have said the U.S. government may suspend Hong Kong’s preferential tariff rates for exports to the United States, a far less severe response than formally revoking Hong Kong’s special status under U.S. law.

Trump said he’d announce a response to China’s policies towards Hong Kong later this week.

Oil futures took a beating as investors fretted about Trump’s response to China. U.S. crude oil futures (CLc1) fell 2.68% to $31.93 early Thursday.

Uncertainty over Hong Kong’s future dragged the yuan in offshore trade to a record low of 7.1966 per dollar. It recouped some of its losses by early Thursday and was firmer at 7.1792.

The euro (EUR=), however, was buoyed by a 750 bullion euro plan to shore up economies hammered by the coronavirus pandemic.

That pushed the euro to an eight-week high and by early Thursday, the common currency had nudged up 0.1% to 1.1016, while the U.S. dollar index was down 0.09% at 98.927.

Gold investors, on the other hand, appeared to shrug off geopolitical risks and focused instead on optimism around the re-opening of the world economy, paring their holdings of the safe-haven metal. Prices extended overnight losses and spot gold traded at $1,708.60 per ounce. 

NEW YORK (Reuters) – Asian stocks were set to rise on Friday amid investor optimism about the re-opening of the U.S. economy from coronavirus lockdowns and possibly more stimulus that could fuel a recovery.

U.S. President Donald Trump said he was open to negotiating another possible stimulus bill amid the novel coronavirus pandemic, but “was taking his time” to see if more federal action was needed.

Ahead of the Asian open, Hong Kong’s Hang Seng index futures (HSI)<.HSIc1> climbed 0.16%, Australian S&P/ASX 200 futures rose 0.85%, while {{178|Japan’s NiNikkei 225 futures (NKc1) were down 0.15%.

“We’re expecting to see a positive situation evolve here,” said Ryan Felsman, a senior economist at CommSec in Sydney, noting that Asian equities would likely follow the positive Wall Street lead, driven in part by gains in banking and energy.

The Dow Jones Industrial Average (DJI) rose 1.62%, the S&P 500 gained 1.15%, and the Nasdaq Composite (IXIC) rose 0.91%.

Stock markets have rallied more than 30% since their March lows following unprecedented government stimulus measures and central bank intervention to counter the impact of economic lockdowns. Federal Reserve Chairman Jerome Powell quashed talk of U.S. interest rates going negative to kick-start investment.

Optimism over potential stimulus spurred investors to look past a report from the U.S. Labor Department, which showed just under 3 million new jobless claims last week, pushing the seven-week tally well over 36 million.

Investors also shrugged off bellicose remarks from President Trump regarding U.S.-China trade and a whistleblower’s dire warnings that the United States could face “the darkest winter” if it does not improve its response to the pandemic.

Investors on Friday are awaiting monthly data from China that tracks industrial production, fixed asset investment and retail sales. The retail data will be an especially insightful indicator of China’s recovery as its economy reopens, Felsman said.

Residents in Wuhan, the Chinese city where the novel coronavirus emerged, braved pouring rain in queues of more than an hour to take part in a government-led exercise to test the city’s 11 million people for the novel coronavirus, a scale health experts describe as unprecedented.

The Japanese yen remained strong on the back of increased safe-haven demand, but is set to slip below the 107 yen per dollar mark, Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said in a note.

In commodity markets, oil prices settled higher on Thursday after the International Energy Agency (IEA) forecast lower global stockpiles in the second half of 2020, although worries remain that a second surge in coronavirus infections could occur in coming months.

Brent crude futures settled up $1.94, or 6.7%, to $31.13 a barrel.

U.S. West Texas Intermediate (WTI) crude futures settled up $2.27, or 9%, to $27.56 a barrel.

Emerging market stocks lost 0.92%. MSCI (NYSE:MSCI)’s broadest index of Asia-Pacific shares outside Japan closed 1.32% lower.

Against a basket of its rivals, the dollar rose 0.20%, hitting a three-week high.

Benchmark 10-year U.S. Treasury notes last fell 1/32 in price to yield 0.6218%

Rolling updates on the latest developments and headlines from around the world on the COVID-19 pandemic. 

By Gina Lee and Peter Nurse 

01:09 AM ET: UK retail sales dropped in April by most in at least 25 years

U.K. retail sales dropped in April by the most in at least a quarter of a century, according to industry figures that outline the impact of the shutdown on stores.

The British Retail Consortium said total sales fell 19.1% in April compared with a year earlier, the most since its monitor began in 1995. In a further sign of the damage done by the lockdown, a Barclaycard measure of consumer spending fell 36.5% last month.

00:59 AM ET: China’s air passenger numbers fell 68.5% in April, an improvement from March

China’s air passenger numbers fell 68.5% in April from a year ago, for a drop smaller than in March, the aviation regulator said on Wednesday, pointing to a fragile industry recovery from the coronavirus pandemic.

Air passengers numbered 16.72 million in April, Xiong Jie, a spokesman of the Civil Aviation Administration of China, told an online news conference. That compared with a decline of 71.7% on the year in March, when passengers numbered 15.13 million.

00:55 AM ET: Malaysia posts slowest growth through March since 2009

Malaysia’s economy unexpectedly expanded, growing 0.7% in the three months through March compared to a year earlier, but at its slowest pace since 2009, according to Malaysia’s central bank.

The economy contracted 2% on a seasonally adjusted basis compared to the previous three months, the central bank added.

00:51 AM ET: Chinese city of Jilin imposes fresh travel restrictions after new outbreak

The northeast Chinese city of Jilin is imposing fresh restrictions on travel in order to contain a new coronavirus outbreak, with six new cases reported on Tuesday.

Jilin has emerged as the source of a potential new wave of infections and the neighbouring city of Shulan was forced to adjust the risk level to “high” from “medium” at the weekend.

10:10 PM ET: Gilead opens remdesivir to generic drugmakers, NRC to work with CanSino on vaccine

Gilead Sciences (NASDAQ:GILD) licensed remdesivir, its potential Covid-19 treatment, to five generic drug manufacturers in India and Pakistan to speed supply chain development and help meet anticipated demand. 

The five companies are Cipla Ltd., Ferozsons Laboratories, Hetero Labs Ltd., Jubilant Lifesciences, and Mylan (NASDAQ:MYL). They will now be able to produce the drug without paying royalties until either another treatment to prevent Covid-19 is developed or the World Health Organization declares an end to the pandemic. 

Meanwhile, Canada’ National Research Council said on Tuesday that it will work with China’s CanSino Biologics to advance bioprocessing and clinical development of a potential vaccine. The Ad5-nCoV vaccine candidate received Chinese regulatory approval earlier this year, and CanSino will move ahead with human clinical trials in China.   

10:06 PM ET: South Korea suffers biggest month of job losses in two decades 

South Korea reported its biggest month of job losses in more than two decades in April, with the number of jobs falling by 476,000 from the same month a year ago. 

The drop continued a second month of rising unemployment as businesses such as hotels and restaurants slashed hiring, data from the statistics office said. 

10:02 PM ET: Brazil and Mexico report record surge in deaths 

Brazil is fast becoming a new virus hotspot as it recorded 881 deaths on Tuesday. Johns Hopkins University data said that the country had 177,602 confirmed cases and 12,404 deaths as of May 13.

Meanwhile, Mexico reported a record 353 more deaths and 1,997 confirmed cases on Tuesday.  

According to Johns Hopkins University data, Mexico has 36,327 cases and 3,573 deaths as of May 13. 

By Hideyuki Sano

TOKYO (Reuters) – The dollar was on the defensive against its rivals on Wednesday as traders looked to Federal Reserve Chairman Jerome Powell’s speech amid rising speculation the United States could one day adopt negative interest rates.

Risk-sensitive currencies lacked momentum as a warning from a top U.S. health official about the dangers of reopening the economy too soon served as a reminder of the uncertainties facing an economy which has been ravaged by the novel coronavirus.

The dollar traded at 107.15 yen , having slipped from Tuesday’s peak of 107.76, its highest since April 24.

The euro changed hands at $1.0848 (EUR=) after having gained about 0.4% in the previous session.

U.S. President Donald Trump on Tuesday again pushed the Federal Reserve to adopt negative interest rates, a hot topic in financial markets since last week when U.S. money market instruments started to price in a chance of negative rates.

U.S. consumer prices dropped 0.8% in April, the biggest since the Great Recession, raising the spectre of deflation as the economy sinks deeper into recession and fuelling the debate about policy responses.

“I would advise against negative rates. Japan has done that but the perception here is that it wasn’t so good,” said Hiroyuki Ueno, senior strategist at Sumitomo Mitsui (NYSE:SMFG) Trust Asset Management.

“But what’s worrying is that Trump is now talking about them. Looking at past examples, the Fed has eventually done what Trump wanted quite often.”

Powell will be speaking on current economic issues in a webcast hosted by the Peterson Institute for International Economics at 9:00 a.m. (1300 GMT).

Although Fed officials have said they do not see a need to cut interest rates below zero – investors think that will become an option especially if the coronavirus outbreak leads to further deterioration in the U.S. economy.

Top U.S. infectious disease advisor Anthony Fauci on Tuesday warned Congress that a premature lifting of lockdowns could lead to additional outbreaks of the deadly coronavirus.

His comments cast a shadow on optimism in financial markets in recent weeks that the worst period of the epidemic is over and the economy can only get better.

U.S. stock prices also slid, led by high-flying technology shares, adding to the cautious mood on the economic outlook.

That put a brake on a rally in risk-sensitive currencies such as the Australian dollar.

The Australian currency stepped back to $0.6473 from Monday’s one-week high of $0.6562.

It took an additional hit on Tuesday after China banned some Australian meat imports, though it trimmed losses later as Australia’s trade minister played down the issue as a technicality.

The New Zealand dollar stood at $0.6082 , down so far in the week but inside its recent trading range ahead of a policy announcement from the country’s central bank later in the day.

The Reserve Bank of New Zealand is expected to keep interest rates on hold at 0.25% while expanding its quantitative easing programme.

The British pound stood near its lowest levels in five weeks at $1.2264 , pummelled also by continued confusion over government plans to ease lockdown measures, the worst COVID-19 death toll in Europe and revived Brexit risks.

Official data published on Tuesday showed Britain’s death toll from COVID-19 topped 38,000 as of early May, having overtaken Italy as the worst affected country in Europe.

BEIJING (Reuters) – China’s factory prices fell at the sharpest rate in four years in April, highlighting weakening industrial demand in the world’s second-largest economy as the coronavirus pandemic slams global growth.

The producer price index (PPI) fell 3.1% from a year earlier, the National Bureau of Statistics said in a statement on Tuesday, compared with a 2.6% drop tipped by a Reuters poll of analysts and a 1.5% decline in March.

Data released last week showed China’s exports unexpectedly grew in April from a year earlier, although a sharper-than-expected decline in imports signalled weak domestic demand.

China is trying to recover from its first economic contraction on record during the January-March quarter, when the economy was paralysed by curbs to slow the spread of the virus that has killed more than 4,600 people in the mainland. But the spread of the virus beyond China now threatens to push the global economy into a deep recession.

Chinese factories have been hit by a plunge in overseas orders and face rising inventories and falling profits, while many have let workers go to cut costs.

As China’s central bank ramped up economic support, banks extended 1.7 trillion yuan ($240.05 billion) in new yuan loans in April, significantly more than a year earlier, while growth of broad money supply also quickened.

Meanwhile, China’s consumer price index (CPI) rose 3.3% from a year earlier, slower than a 3.7% rise tipped by a Reuters poll of analysts and a 4.3% increase in March.

That was largely due to slowing food price growth, which rose over 18% in March. But it still rose 14.8% last month, led by a 96.9% jump in pork prices. Non-food prices rose 0.4% in April, the data showed.

Core inflation – which excludes food and energy prices – remained benign last month at 1.1%，down from 1.2% in March.

Analysts expect further monetary easing soon, although Beijing is likely to rely on fiscal stimulus to cushion growth.

By Herbert Lash and Suzanne Barlyn

NEW YORK (Reuters) – Asian equities and oil prices were set to slip on Tuesday amid growing investor worries about a second wave of coronavirus infections after the Chinese city where the pandemic originated reported its first new cases since its lockdown was lifted.

The central Chinese city of Wuhan reported five new confirmed cases on Monday, casting doubts over efforts to lower coronavirus-related restrictions across the country as businesses restart and individuals went back to work.

Hong Kong’s Hang Seng index futures (HSI) <.HSIc1> were down 0.68% while {{178|Japan’s NiNikkei 225 futures (NKc1) were off 0.1%.

“My feeling is that it will be flat to slightly down across Asia,” said Shane Oliver, head of investment strategy and economics for AMP (OTC:AMLTF) Capital in Sydney, citing concerns about coronavirus clusters and a potential second wave.

Australian S&P/ASX 200 futures fell 0.35%.

The S&P 500 barely closed higher on Wall Street, but the Nasdaq posted its sixth consecutive advance as technology and healthcare shares provided the biggest lift to all three major U.S. stock indexes.

The Nasdaq is now within 10% of its all-time high reached in February.

A jump in coronavirus cases in South Korea and Germany weighed on Wall Street sentiment even amid signs more parts of the United States could soon emerge from lockdowns.

A second wave of infections would likely snuff out the recent rally in equity markets and lead investors to position for a severe and prolonged global recession.

There were some positive cues for markets with China reporting April credit growth accelerated to 12% from a year ago, a sign that the recovery from a collapse in the first quarter remained intact, the National Australia Bank said in a report.

MSCI (NYSE:MSCI)’s gauge of stocks across the globe shed 0.04% following broad declines in Europe.

On Wall Street, the Dow Jones Industrial Average (DJI) fell 0.45%, the S&P 500 (SPX) gained 0.01% and the Nasdaq Composite (IXIC) added 0.78%.

The dollar, defying its typical safe-haven status, rose on Monday, even as investors added risk to their portfolios, buying U.S. stocks and selling Treasuries.

Investors in FX markets had mixed risk expectations, with an eye on warnings of a second wave of COVID-19 infections as more countries eased lockdown restrictions.

Bond markets signaled that a global economic recovery will be slow. Two-year U.S. government bond yields have hit record lows at 0.105% and Fed fund futures last week turned negative for the first time ever.

Benchmark 10-year notes last fell 11/32 in price to yield 0.7147%, from 0.681% late on Friday.

In commodity markets, oil prices slid as the pandemic eroded global demand.

U.S. crude recently fell 0.08% to $24.72 per barrel and Brent was at $30.09, down 2.84% on the day.