Global stocks kicked off the week on a high note as shares in the US technology industry extended their record-breaking streak.
US equities traded positively, with the technology-heavy Nasdaq Composite index riding almost 1 per cent higher in early trading in New York. The broader-based S&P 500 gained 0.7 per cent to build on a four-week advance that has taken Wall Street’s main barometer to a record, wiping out the steep loss caused by the coronavirus crisis.
“Big cap tech continues to ride the wave of euphoria and momentum while most other areas of the market that have lagged are more worried about the macroeconomic environment,” said Peter Boockvar at Bleakley Advisory Group. “We need the latter to reverse in order to maintain the former.”
He added: “I certainly can’t give you a good fundamental reason for the rally because I can’t find one.”
Apple set the pace, days after it became the first US group to hit a $2tn market valuation. The iPhone maker rose more than 3 per cent in early trading, with gains too for Amazon and Microsoft.
The S&P 500 has soared 55 per cent above the low it hit during the market ructions in March.
European equities gained strength from the buoyant mood in the US and Asia. The Stoxx 600 stepped up its pace to add 1.5 per cent in early afternoon trade on Monday, with equities advancing in Frankfurt, Paris and London. The regional benchmark is 14 per cent off its high for the year, struck in February.
Traders looked beyond the rising coronavirus caseload in Europe, which has unsettled some regional governments, and instead focused on signs of progress on developing a vaccine.
The Trump administration is considering bypassing US regulatory standards to fast-track an experimental vaccine being developed in the UK by Oxford university and AstraZeneca before the November general election, the Financial Times reported at the weekend. The US has also just given emergency authorisation for the use of plasma from recovered patients to treat some people currently in hospital.
Market participants said, in addition to Covid-19 developments, they would be paying close attention to the Kansas City Fed’s virtual Jackson Hole summit. Economists are expecting Jay Powell, the central bank chair, to unveil details of the Federal Reserve’s wide-ranging review of monetary policy.
“Indications that the Fed might adopt a so-called flexible average inflation-targeting approach could lead yields and rates of market-based inflation compensation slightly higher, while keeping a lid on real rates,” UniCredit analysts said in a note.
Minutes from the Fed’s July meeting, released last week, briefly weighed on market sentiment after the central bank threw cold water on the idea that it might soon consider taking measures aimed at capping longer-term government bond yields.
The other US event to take centre stage this week will be the four-day Republican national convention, when Donald Trump will accept his party’s renomination to run for a second term as president.
Asian equities were buoyant after recent weeks of caution over the regional spread of coronavirus. Hong Kong’s Hang Seng index added 1.7 per cent while the CSI 300 gauge of Shanghai and Shenzhen-listed stocks rose 0.8 per cent. In Tokyo, the Topix edged 0.2 per cent higher and South Korea’s Kospi index gained 1.1 per cent.
Chinese tech group Tencent jumped 4.2 per cent, the most in two weeks, after it was reported that a White House executive order banning its WeChat app may not be as severe as previously believed.
Mr Trump this month gave US companies 45 days to stop their “transactions” with the app. The move has prompted legal action from a coalition of users and came as tensions rise between Washington and Beijing.
Meanwhile, Brexit talks between Brussels and London rumble on. Another round of talks on Friday broke up with “little progress” and some rancour between the two sides.
“Unfavourable developments increased the risk of a ‘no-deal’ Brexit with time fast running out,” currency analyst Lee Hardman at MUFG said on Monday.
“Despite the lack of progress, market participants remain of the view, though, that a last-minute deal will be reached to avoid providing another negative shock to Covid-hit economies,” Mr Hardman said. “Continued optimism that a deal will eventually be struck is helping to dampen the negative pound reaction in the near-term.”
The pound fell 0.2 per cent versus the euro. One euro bought 90.20p on Monday. Against the dollar, sterling was little changed to bring it on track for a one-month 2.4 per cent gain.