LONDON: Global stock markets rose sharply on Monday as governments relaxed coronavirus lockdowns and investors were willing to bet that the world economy has seen the worst of the pandemic’s impact.

A joint French-German plan for a massive EU relaunch programme worth a staggering €500 billion ($542bn), announced just before European markets closed gave them an extra push over the finishing line.

Oil prices surged back above $30 per barrel and gold rose to levels not seen in more than seven years.

“It has been a very optimistic start to the new week with stocks, crude oil, copper, gold and silver all pushing higher,” said Fawad Razaqzada at ThinkMarkets.

France, Germany hatch €500bn EU relaunch plan

‘Sentiment boosted’

Traders also not only brushed off a warning from the head of the Federal Reserve that a full recovery would likely not come until next year, but took the statement as a sign that more central bank stimulus is coming, further fuelling their appetite for stocks.

“Sentiment has been boosted as many European countries including Spain, Italy and the UK reported the lowest number of Covid-19 related deaths for two months at the weekend and as several countries ease lockdown restrictions,” Razaqzada said.

On Wall Street, the Dow Jones index was more than 800 points higher by the late New York morning, while key eurozone markets were more than five percent up at the close, with London up over four percent.

‘Running wild’

“As lockdown easing progresses, investors continue to value companies as if the global economy has already hit its low point,” said Jasper Lawler at London Capital Group.

Sentiment was also boosted by US biotech firm Moderna reporting “positive interim” results on Monday in the first clinical tests of its vaccine against the new coronavirus performed on a small number of volunteers.

“Risk appetite is running wild after Moderna’s experimental vaccine showed promising early signs to create an immune-system response that might be able to fight off Covid-19,” said Edward Moya at OANDA.

Major markets in Asia had closed higher earlier Monday, but by much lower percentages than subsequently posted by European and US markets.

Neil Wilson at Markets.com said gold, which hit a high last seen in October 2012, had “emerged as a clear winner from the economic turmoil created by the pandemic” — Yeah, but will it last?

Published in Dawn, May 19th, 2020