(Reuters) – European shares fell on Monday as signs of a resurgence in coronavirus cases in Germany and elsewhere unnerved investors who were hoping for a swift economic recovery from the crisis.

The pan-European STOXX 600 index (STOXX) slid 1% by 0710 GMT, with travel and leisure (SXTP), oil and gas (SXEP), and bank stocks (SX7P) leading losses.

The World Health Organization reported a record increase in global coronavirus cases on Sunday, while Germany’s COVID-19 reproduction rate jumped to 2.88, a rate showing infections are rising above the level needed to contain the disease over the longer term.

Scandal-hit Wirecard (DE:WDIG), which lost 72% in market valuate over the past week, fell another 43.9% as it said a quarter of its assets totalling 1.9 billion euros ($2.13 billion) that auditor EY had been unable to account for likely did not exist and withdrew its earnings forecast.

Lufthansa (DE:LHAG) dropped 6.7% amid a showdown between the airline’s biggest shareholder and the German government over the terms of a 9-billion-euro bailout.

Investing.com – The dollar has drifted lower in early European trade Monday, but that’s off three-week highs as investors looked for safety amid renewed worries about a second wave of coronavirus infections.

At 3 AM ET (0700 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 97.493. The index had earlier climbed to a daily high of 97.677, a level not seen since the start of this month, while USD/JPY was up 0.1% at 106.94.

“The main driver has been concerns about the spread of the coronavirus and arguably the speed of the global recovery, emphasizing the still strong FX versus risk correlation,” said analysts at Danske Bank, in a research note.

Sunday saw a record 183,020 cases globally, according to the World Health Organization, with the bulk in North and South America. The number of global cases is now almost 9 million, according to Johns Hopkins University data.

EUR/USD last traded up 0.1% at 1.1191 after dipping to a three-week low of 1.1168 in early trade. This followed the failure of the European Union leaders to agree on a structure for the planned 750 billion euros Covid-19 recovery fund.

“From the comments from the leaders, the disagreement does not seem to be about the size of the package, but rather about grants versus loans distribution,” said Danske Bank.

This is proving a tricky obstacle, with four members [Sweden, Denmark, Austria and the Netherlands] being particularly vocal in their opposition to the plan to pay out the majority of this stimulus in grants instead of loans.

The EU leaders are aiming to reach an agreement before the summer break, which may mean late July/early August, potentially at a physical meeting.

GBP/USD gained 0.2% to 1.2379, holding just above a three-week low, weighted as well by Brexit worries since there has been little progress in trade discussions with Europe.

MANILA/BEIJING (Reuters) – Behind the boom in China’s steel production since March – and hopes for a quick economic recovery – is a tale of two diverging sectors: construction demand for infrastructure projects has been strong, while manufacturing has been slower to bounce back.

That highlights the challenge facing policymakers as Beijing and local governments can control the pace of spending on projects like roads, rails and reservoirs, but have very limited options to support exports or domestic demand for machinery and appliances.

The soft underbelly in China’s steel revival following the coronavirus outbreak is about to be thrown into stark relief by a seasonal downturn at building sites, analysts say, and points to a more protracted recovery for the world’s second-largest economy from a once-in-a-century pandemic.

“There is only so much China’s steel industry can do while the rest of the world struggles,” said Daniel Hynes, senior commodity strategist at ANZ.

CRITICAL COG

China’s mammoth steel sector has long been a central pillar of its industrial powerhouse, employing hundreds of thousands of workers who churn out vital raw materials for industry and support scores of ancillary logistics and processing businesses.

The economy shrank 6.8% in the first quarter, the first contraction in decades, hit by the new coronavirus which emerged in China late last year.

The surge in steel output to all-time highs in May raised hopes that the heart of the economic engine is recovering well, and may help resuscitate growth at home and globally.

Yet amid the recent sector-wide bustle has been a lopsided reliance on metal demand from construction sites that has partially masked weakness from manufacturers and calls into question the robustness of the steel boom as well as how quickly China can restore growth.

(GRAPHIC: China’s GDP vs crude steel output – https://fingfx.thomsonreuters.com/gfx/ce/yzdvxdlmzvx/Annotation%202020-06-19%20115357.jpg)

“The market appears to be relying too heavily on expected infrastructure stimulus in China to boost demand,” ANZ’s Hynes said.

REBAR RELIANCE

Demand for the main steel products used in construction – rebar and wire rod – has accounted for an average over 53% of total steel demand since late March, according to calculations based on figures from data-tracking firm Mysteel.

That compares to an average of 47.5% for all of 2019, and 51% for the same period in 2019.

(GRAPHIC: Seasonal steel demand by product in China – https://fingfx.thomsonreuters.com/gfx/ce/nmovakealva/SeasonalSteelDemand2020.png)

At the same time, demand for the main steel products used by manufacturers – hot-rolled coil (HRC) and cold-rolled coil (CRC) – has been well below normal, averaging 35% of total demand since late March compared to 40.4% on average in 2019.

Stocks of rebar have also fallen faster than other steel products, dropping by 51% since peaking in mid-March.

(GRAPHIC: Seasonal steel stocks by type in China – https://fingfx.thomsonreuters.com/gfx/ce/gjnvwymdbvw/SeasonalSteelStocks2020.png)

Given the extent of lockdowns in many of China’s trading partners, sluggish factory demand is not too surprising and could persist for many more months.

Yet the surge in overall steel production – driven by a 59% jump in rebar and 40% rise in wire rod output since mid-March – suggests the sector is at risk of over-supplying the market just as demand is expected to take a hit from rained-out work sites, especially across the South.

(GRAPHIC: Seasonal steel production by type – https://fingfx.thomsonreuters.com/gfx/ce/dgkvlwnyxpb/SeasonalSteelOutput2020.png)

The monsoon season, which runs through August, arrived 10 days earlier than normal in southern China this year, causing widespread floods that have already stopped work at some sites.

“We are now about to enter the traditional slack season for steel consumption,” said Richard Lu, senior analyst at consultancy CRU in Beijing. “It will largely depend on the weather, and we should see some decline at least starting from July, if not late June.”

The most-active rebar contract has rallied 14% from April 1.

DEMAND DEPRESSION

While construction materials are losing demand momentum, flat steel use has been plagued by the global economic contraction and that has kept China’s factories underpowered.

(GRAPHIC: Exports of home appliances from China – https://fingfx.thomsonreuters.com/gfx/ce/oakpeqwznpr/612e.jpg)

Sales of steel-heavy items like autos and machines have fallen this year, with China’s auto exports dropping 16.9% in the first five months, and home appliance exports – worth $77.8 billion in 2019 – down 9.1%.

Direct metal exports have also dropped.

STIMULUS TEST

To offset lower global demand China’s policymakers have unveiled stimulus measures aimed at reviving consumption and supporting large infrastructure projects including key industries.

(GRAPHIC: Monthly output for main home appliances in China – https://fingfx.thomsonreuters.com/gfx/ce/xlbvggerdvq/612d.jpg)

However, the uneven steel demand shows the limits of Beijing’s stimulus, which comes with its own risks, and points to a bumpy economic recovery.

“The Chinese government does not want to spend a lot on stimulating the economy because that also means having to pile up debts,” said Iris Pang, ING chief economist for Greater China.

TOKYO (Reuters) – U.S. stock futures erased losses and Asian stocks held flat on Monday, trying to shake off worries that rising coronavirus cases in the United States could scupper a quick economic rebound from the massive downturn triggered by the pandemic.

U.S. S&P 500 futures (ESc1) rose 0.4%, having erased early losses of 1.05% while Japan’s Nikkei (N225) also eked out gains of 0.1%, similarly recovering from early losses.

MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) was almost flat while mainland Chinese stocks (CSI300) ticked up 0.3% to 3-1/2-month highs.

After a brutal sell-off earlier this year, share prices had risen globally over the past three months, helped by massive stimulus around the world and hopes the worst of the pandemic was over.

“The market is surprisingly resilient. Perhaps many investors think the uptrend is in place. But we need to keep an eye on rising coronavirus infections in some countries,” said Hirokazu Kabeya, chief global strategist at Daiwa Securities.

Highlighting economic challenges from the impact of social restrictions to contain the pandemic, Apple Inc (O:AAPL) said on Friday it would temporarily shut 11 U.S. stores as coronavirus cases rise in some states, triggering selling in stocks.

Data from Johns Hopkins University shows new U.S. cases on Saturday hit the highest since early May.

Graphic: COVID-19 in the United States, https://fingfx.thomsonreuters.com/gfx/mkt/nmovajmrbpa/20622D.png

“The second wave is becoming a theme for markets. The increase in states such as Florida and South Carolina is big enough to be labelled as second wave,” said Yoshinori Shigemi, global strategist at JPMorgan (NYSE:JPM) Asset Management.

“Whether there will be a lockdown may vary depending on region. It will be a tough decision for politicians. But they probably have no other choice if they are running out of hospital beds,” he said.

The pandemic is accelerating globally with the World Health Organization (WHO) reporting a record increase in global coronavirus cases on Sunday.

“The market has been pricing in a rapid recovery so I doubt there are much upside gains to be made. We now need to see whether the earnings outlook will meet up with expectations,” said Takuya Hozumi, investment strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

The world’s shares are now traded at the most expensive levels since 2002 compared with projected earnings in the coming 12 months.

Graphic: World stock market valuations, https://fingfx.thomsonreuters.com/gfx/mkt/jznpnzdgopl/20622E.png

Investors are also wary of developments in Hong Kong after details of a new security law for the territory showed Beijing will have overarching powers on its enforcement.

China’s top legislative body, the National People’s Congress Standing Committee, will meet on June 28, and the Global Times reported it would likely enact the Hong Kong security law by July 1.

Hong Kong’s Hang Seng (HSI) fell 0.3% in early trade, underperforming regional markets.

In currencies, major currencies were mostly steady.

The euro traded at $1.1187 (EUR=), near its lowest in nearly three weeks.

The yen changed hands at 106.88 per dollar , not far from a one-month high of 106.58 to the dollar hit earlier this month.

Concerns about the pandemic sent gold 0.8% higher to $1,757.2 per ounce, near its May peak of $1,764.8, which was its strongest since October 2012.

Oil prices firmed slightly on tighter supplies from major producers, but concerns that a record rise in global coronavirus cases could curb a recovery in fuel demand checked gains.

Brent crude (LCOc1) rose 0.6% to $42.44 a barrel while U.S. crude (CLc1) was at $40.05 a barrel, up 0.6%.

TOKYO/WASHINGTON (Reuters) – Asian stocks and Wall Street futures fell on Thursday as spiking coronavirus cases in some U.S. states and China crushed hopes of a quick global economic comeback from the pandemic.

S&P 500 mini futures fell 1.2% in early Asian trade while MSCI’s broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) lost as much as 1%.

Japan’s Nikkei (N225) lost 1.3% while in mainland China, bluechip CSI300 shares (CSI300) shed 0.1% in early trade.

On Wall Street, the S&P 500 (SPX) lost 0.36% on Wednesday but tech-heavy Nasdaq (IXIC) added 0.15% due to hopes of increased demand for various online services due to the epidemic.

Several U.S. states including Oklahoma, where President Donald Trump plans a campaign rally on Saturday, reported a surge in new coronavirus infections.

The daily count of infections also hit a new benchmark in California and Texas, while Florida and Arizona also recorded the second-highest daily increases.

China’s capital cancelled scores of flights, shut schools and blocked off some neighbourhoods as it ramped up efforts to contain a coronavirus outbreak that has fanned fears of wider contagion.

“It is a big shock to markets that China, which appears to have successfully quashed the disease, is seeing a second wave. And in the U.S. we see record cases in many states,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities.

“All this suggests that the more you re-start the economy, the more infections you have. People have thought the economy will quickly recover in July-September after dismal April-June. But that is now becoming uncertain.”

Investors rushed to the safety of bonds, with the 10-year U.S. Treasuries yield (US10YT=RR) falling 3 basis points to 0.704%.

In the currency market, the safe-haven yen rose about 0.3% to 106.72 per dollar while the U.S. dollar also firmed against risk-sensitive currencies.

The euro dipped 0.1% to $1.1235 (EUR=) while the Australian dollar lost 0.4% to $0.6852, also hit by worse than expected employment data.

Australia’s unemployment rate jumped to the highest in about two decades in May as nearly a quarter of a million people lost their jobs due to the coronavirus pandemic-driven shutdowns.

Oil prices also dropped with U.S. crude futures falling 1.9% to $37.49 per barrel, while international benchmark Brent (LCOc1) lost 1.4% to $40.14 a barrel.

WASHINGTON (Reuters) – Asian stocks were set to climb on Wednesday after another late Wall Street surge in response to upbeat trial results for a COVID-19 treatment and data showing U.S. consumers spent big in May.

The prospects of fresh support from the Federal Reserve and Bank of Japan also supported global equity markets.

“It was a trifecta of positives today,” said Jeffrey Carbone, a partner at North Carolina-based Cornerstone Wealth, referring to the U.S. data, drug trials and central bank promises.

The upbeat sentiment weighed of U.S. Treasuries and supported demand for lower-rated southern European debt. Not everyone was in the mood for risk, however, with safe-have gold pushed higher on news of a fresh coronavirus outbreak in China.[GOL/]

“We got potentially more positive news in the fight against COVID-19,” said Ryan Detrick, senior market strategist at LPL Financial (NASDAQ:LPLA) in Charlotte, North Carolina. “But while COVID is in most people’s minds, in the stock market’s view it is all about reopening and the strong data suggest the recovery is happening and faster than most expected.”

At the beginning of his two-day testimony before Congress, Fed Chairman Jerome Powell said a full recovery was unlikely until the public is confident the disease had been contained.

In Asia, Australian S&P/ASX 200 futures were up 0.5%, while {{178|Japan’s NiNikkei 225 futures were up 0.2% but down 0.6% from the underlying index’s Tuesday close.

Hong Kong’s Hang Seng index futures were down 0.3%.

U.S. retail sales jumped a record 17.7% in May, blowing past the 8% increase analysts expected and supporting views the U.S. recession might be drawing to an end.

Also cheering investors were trial results showing dexamethasone, a cheap and widely used steroid, reduced death rates by about one-third among the most severely ill COVID-19 patients.

On Wall Street, the Dow Jones Industrial Average rose 2.0%, the S&P 500 gained 1.9% and the Nasdaq Composite added 1.8%. That followed a broad 3% rally in major European bourses.

The MSCI’s gauge of stocks across the globe gained 2.2%.

News elsewhere contributed to the bullish sentiment.

Germany’s monthly ZEW investor sentiment survey showed investors are confident that Europe’s largest economy will be over the worst of the coronavirus impact by the end of the European summer.

The dollar was mostly stronger, with the euro down 0.55% to $1.126 and the Japanese yen up 0.01% at 107.32.

The British pound rose on unemployment numbers that were not as bad as feared and friendlier Brexit talks.[GBP/]

The BOJ increased its lending packages for cash-strapped firms to $1 trillion from about $700 billion, while keeping rates steady, sticking to its view that the Japanese economy will gradually recover from the pandemic.

The yield on the benchmark U.S. 10-year Treasury notes rose 4.7 basis points to 0.7495%.

German, French, Dutch and other core yields also rose. Riskier Italian yields fell to their lowest level since the end of March, and the iTraxx European crossover index, which reflects the cost of insuring against junk-rated corporate bond defaults, fell to its lowest level in six days.

Investing.com – European stock markets climbed strongly Tuesday, helped by further signs central banks will continue to support the global economy in the wake of the damage caused by the coronavirus pandemic.

At 4:30 AM ET (0810 GMT), the DAX in Germany traded 2.1% higher, France’s CAC40 rose 1.8%, the U.K.’s FTSE index was up 2.3%.

The U.S. Federal Reserve said late Monday it will soon start purchasing individual corporate debt, extending a program that previously had been limited to purchasing bond exchange traded funds. 

The Bank of Japan followed earlier Tuesday by extending its corporate lending package to around $1 trillion. The focus will soon turn to Thursday’s monetary policy meeting of the Bank of England, particularly after Tuesday’s unemployment dataemphasised the country’s difficult economic circumstances.

Additionally, European Central Bank board member Fabio Panetta urged the European Union to urgently decide on a package of fiscal measures to help the bloc through its pandemic-induced economic crisis.

The EU proposed a 750 billion euro package last month, including 500 billion in grants, but resistance from a handful of fiscally conservative nations has threatened to delay the deal and no agreement in June is now expected.

Global equities had fallen sharply due to worries about the U.S. economy and confirmation of a new coronavirus cluster in China.

However, the Fed’s move and data showing the outbreak in Beijing was being tamed–27 new coronavirus cases reported on Monday, down from 36 new cases the previous day–helped equities head higher.

German consumer price inflation remained in negative territory in May, which will concern the European Central Bank with its inflation-based mandate.

In corporate news, travel stocks including cruise-ship operator Carnival (LON:CCL) and International Consolidated Airlines Group (LON:ICAG) posted strong gains. 

One outlier was German online fashion house Zalando, which fell 5.1% after strategic shareholder Kinnevik said it would sell a 4.2% stake through an accelerated bookbuilding process.

Oil prices have edged higher, helped by the renewed enthusiasm in the equity markets, but gains are tentative.

At 4:10 AM ET, U.S. crude futures traded 0.1% higher at $37.14 a barrel. The international benchmark Brent contract rose 0.4% to $39.88.

Elsewhere, gold futures rose 0.4% to $1,735.90/oz, while EUR/USD traded at 1.1325, up 0.1%.

TOKYO (Reuters) – The Bank of Japan kept monetary settings steady on Tuesday and stuck to its view that the economy will gradually recover from the coronavirus pandemic, signalling that it has taken enough steps to support growth for now.

However, it increased the nominal size of its lending packages for cash-strapped firms to $1 trillion from about $700 billion announced last month.

While the BOJ remains focused on steps to ease corporate funding strains, Governor Haruhiko Kuroda may offer hints on how it will deal with longer-term issues such as how to fire up growth and inflation when the pandemic begins to subside.

“Given markets have calmed down and the economy appears to be bottoming out, there’s no reason for the BOJ to take action anytime soon,” said Hiroshi Shiraishi, senior economist at BNP Paribas (OTC:BNPQY) Securities.

“Fiscal policy will play a main role in responding to the virus fallout, so the central bank will continue to indirectly help the government by keeping borrowing costs low,” he said.

In a widely expected move, the BOJ maintained its yield curve control targets at -0.1% for short-term interest rates and 0% for long-term rates.

The central bank also made no major changes to its programmes to ease corporate funding strains, including a lending facility aimed at channeling funds to firms.

Due to the way it is designed, the amount of money to be pumped out via the programmes will reach 110 trillion yen ($1 trillion) if more loans are taken out via government schemes, the central bank said.

That was larger than an estimate of 75 trillion yen made in May, as the government expanded the range of eligible loans under a second stimulus package.

The BOJ is among a host of major central banks that have pumped trillions of dollars into financial systems to support businesses hit by the coronavirus pandemic.

Finance Minister Taro Aso praised the BOJ’s money printing, telling reporters on Tuesday the central bank’s lending facilities “undoubtedly led to an increase in money supply.”

Markets have widely expected the BOJ to stand pat after it expanded stimulus in March and April, mainly by boosting asset purchases and creating lending facilities to channel money to companies hit by slumping sales from the pandemic.

Prime Minister Shinzo Abe declared a state of emergency in April, requesting businesses to close and citizens to stay home, a move that dealt a severe blow to consumption.

The emergency was lifted in late May, but analysts expect the economy to have contracted more than an annualised 20% in the current quarter, after having slipped into recession.

The BOJ maintained its guarded optimism on the outlook and stressed its readiness to ease policy again if needed.

“Although economic activity will gradually resume, Japan’s economy will remain in a severe state for the time being,” the central bank said in a statement.

“Once the impact of the pandemic subsides, the economy is likely to improve” due to an expected rebound in consumption and output, as well as the boost from government stimulus, it said.

TOKYO (Reuters) – Asian shares and Wall Street futures rallied on Tuesday as the formal start of the Federal Reserve’s corporate bond buying programme boosted global investor sentiment and calmed earlier worries about a second wave of coronavirus infections.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.2%, its biggest one-day gain since June 1. Australian stocks rose 3.0%, while shares in China rose 1.2%.

U.S. stock futures, the S&P 500 e-minis, were up 0.98% following a late rally on Wall Street on Monday. Treasury yields rose and the yield curve steepened.

The Fed said it will start purchasing corporate bonds on Tuesday in the secondary market, one of several emergency facilities launched in the wake of the coronavirus pandemic.

Global equities had fallen sharply from late last week due to worries about the U.S. economy and confirmation of a new coronavirus cluster in Beijing.

However, the Fed’s corporate bond purchases and data showing new infections in Beijing are under control helped equities quickly reverse course and head higher.

“Equities were overbought and corrected lower, but the S&P 500 has bounced off support because of the Fed,” said Shane Oliver, head of investment strategy and chief economist at AMP (OTC:AMLTF) Capital Investors in Sydney.

“The markets will continue to go higher a long as economies continue to reopen and as long as the number of coronavirus cases is not large enough to stop the reopening.”

Sentiment in Asia got a further boost after health officials said there were 27 new coronavirus cases in Beijing, down from 36 new cases the previous day.

Japan’s Nikkei stock index and shares in South Korea were both on course for their biggest daily gain in two months.

The Australian dollar rose 0.31% to $0.6942. The Aussie is often traded as a liquid proxy for risk because of its close ties to China’s economy and global commodities.

The yen was little changed at 107.32 per dollar before a Bank of Japan meeting ending later on Tuesday.

No major policy moves are expected, but some investors will focus on any comments about the global debate on capping government bond yields.

The Fed on Monday also announced eagerly-awaited details of its programme to lend funds directly to companies.

Benchmark 10-year Treasury yields notes edged up to 0.7363%, while the spread between two-year and 10-year yields widened to 54 basis points in a sign of improving risk appetite.

Crude oil futures erased gains and fell amid persistent doubts over whether supply cuts would be enough to reduce an oil glut.

U.S. crude fell 1.2% to $36.68 a barrel. Brent crude declined by 1.2% to $39.23 per barrel.

TOKYO (Reuters) – Japan will resume fiscal reform once the economy overcomes the hit from the coronavirus pandemic, Prime Minister Shinzo Abe said, brushing aside calls by some lawmakers to keep spending permanently with money printed by the central bank.

The government has pledged to spend a combined $2.2 trillion in two stimulus packages to cushion the economic blow from the pandemic, while the central bank has pledged to buy unlimited amounts of bonds to cap borrowing costs at zero.

“Japan’s economy is battling a crisis, so the priority now is to use all available means to put it on a recovery path,” Abe told parliament on Monday, when asked how Japan would reconcile the huge spending with the need to fix its tattered finances.

“By achieving economic growth, Japan can restore fiscal health. But that doesn’t mean Japan can endlessly increase debt,” he said, adding the government will resume efforts to improve the country’s fiscal health once the economy stabilises.

Abe’s remarks come amid calls from some lawmakers for Japan to prop up the economy via unlimited money-printing to finance government spending – a concept dubbed “Modern Monetary Theory” (MMT) that has been floated by some U.S. academics.

Japan’s economy slipped into recession and is seen suffering an annualised contraction of over 20% in April-June, as lockdown measures to contain the pandemic hit consumption and businesses.

Analysts say Japan’s huge public debt – already the biggest among major industrialised nations – constrains its ability to ramp up fiscal spending to spur growth.

S&P Global Ratings last week lowered its outlook on Japan’s sovereign debt rating to stable from positive, citing increased uncertainty over the country’s fiscal health as it boosts spending to combat the health crisis.