Stock markets rise as countries ease lockdowns

World stock markets have risen across the world as countries ease lockdowns. European and US stock markets rallied in response to lockdown easing; however, some analysts say it is just the calm before the storm. Is this a sign of a recovering economy, or is there an another plunge incoming?

stock markets rise

In an encouraging sign for the world economy, global stock markets rise as coronavirus lockdowns were relaxed and China-US tensions appeared to be easing, dealers said. This bodes well for the international financial system, as countries around the world are increasingly ravaged by the coronavirus pandemic.

COVID-19 associated lockdowns have caused a slowdown in the international economy, with experts saying that it will shrink by as much as 6% this year. Estimates of its recovery do not show it recovering before 2022. However, the current rise in stock markets does bode well for this estimated time of recovery.

Stock markets rise in Europe with many companies seeing their shares soar 

In Europe, Frankfurt was the star performer as German investors played catch-up after a long holiday weekend and eyed hopes for a new COVID-19 domestic stimulus package.

Lufthansa shares soared after the airline’s supervisory board approved a nine-billion-euro ($10-billion) bailout from the German government.

Paris equities, also solidly higher, ignored the French government’s dire prediction that the economy will shrink 11 percent this year.

Read more: US-China trade war nearing its end: New Year’s miracle for the global economy

“Stock markets in Europe are showing decent gains as there is continued optimism in relation to the reopening of economies,” said analyst David Madden at trading firm CMC Markets UK.

“Governments have been taking steps to loosen their lockdown restrictions, so there is a growing feeling that things are slowly going back to normal,” he added.

The euro forged another two-month peak.

Oil marched higher on hopes of recovering demand, and amid speculation that key producers including Saudi Arabia and Russia will extend massive output cuts that have helped support the virus-plagued market.

US-China tensions, coronavirus threaten to play spoil-sport

Traders were still tracking China-US tensions — as well as anti-racism protests in several large American cities, and internationally.

“The absence of a serious trade rift between the US and China is helping sentiment,” said Madden.

“Dealers on this side of the Atlantic have watched in horror at the scenes of rioting and looting in the US,” he said.

On Wall Street, the Dow Jones index was higher in the late New York morning, but underperformed its European peers.

Investors were still wary because of the possibility of a second coronavirus wave, and “it’s unlikely they will feel any safer with military Humvees rolling down Pennsylvania Avenue”, said Stephen Innes, chief market strategist at AxiCorp.

Read more: Pakistan stock exchange is the only world market going upward

“The economic recovery has been dependent on reducing fear. If fear is generated by anarchy in the streets, that will harm the recovery,” he said.

Stock markets rise: is it an illusion?

One of Wall Street’s top strategists thinks this optimism is just delusion. David Rosenberg, of Rosenberg Research, says investors are falling into a “classic bear market trap.”

Most bear markets, Rosenberg observes, go through distinct phases. There’s the sharp, initial plunge, which scares the bejeezus out of everyone and triggers panic selling. Then there’s a strong recovery in the face of this fear, which deludes people into thinking the worst is over and a new bull market has begun. Then there’s a long, brutal decline that lasts for a year or more and takes the market far below the depths of the initial plunge.

Rosenberg believes we’re in the second phase — a “bear-market rally” that is calming fears and deluding people into thinking that the storm is over before resuming a more painful decline.

However, if the global economy continues to recover, and we have some medical breakthroughs or good luck and do not experience a major “second wave” of the pandemic, the market could well climb back to new highs.

Key figures of the stock market

London – FTSE 100: UP 0.9 percent at 6,220.14 points (close)

Frankfurt – DAX 30: UP 3.8 percent at 12,021.28 (close)

Paris – CAC 40: UP 2.0 percent at 4,858.97 (close)

EURO STOXX 50: UP 2.6 percent at 3,158.57

New York – Dow: UP 0.5 percent at 25,603.27

Tokyo – Nikkei 225: UP 1.2 percent at 22,325.61 (close)

Hong Kong – Hang Seng: UP 1.1 percent at 23,995.94 (close)

Shanghai – Composite: UP 0.2 percent at 2,921.40 (close)

Brent North Sea crude: UP 2.2 percent at $39.18 per barrel

West Texas Intermediate: UP 1.8 percent at $36.05

Euro/dollar: UP at $1.1184 from $1.1136 at 2100 GMT

Dollar/yen: UP at 108.57 yen from 107.59 yen

Pound/dollar: UP at $1.2546 from $1.2492

Euro/pound: DOWN at 89.14 pence from 89.15 pence

AFP with additional input by GVS News Desk

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