US and European stocks advanced on Monday as investors gauged upbeat developments in a vaccine trial and the latest in negotiations for additional fiscal support amid fallout from the pandemic.
Wall Street’s S&P 500 closed 0.8 per cent higher on strong gains in the consumer discretionary sector. A rally in technology shares powered the Nasdaq Composite to a record closing high, with the index jumping 2.5 per cent in its biggest daily rise since April.
Lawmakers returned to Washington with another stimulus package at the top of the agenda. Steven Mnuchin, US Treasury secretary, indicated during a White House meeting that the Trump administration would open talks for $1tn in supplemental aid. Mitch McConnell, Senate majority leader, said Republicans would put forward a “strong starting point” for a stimulus bill as early as this week.
Investors are also looking for fresh clues this week on how the pandemic has hit corporate earnings, with Microsoft and Unilever among the companies reporting second-quarter results. IBM shares rose 6 per cent in after-hours trading after it beat earnings expectations.
Amazon had its best day since December 2018, surging 7.9 per cent to close just shy of its record high. Microsoft was up more than 4 per cent.
In Europe, Italian borrowing costs dropped on hopes EU leaders will forge a deal to launch a fund to help the bloc recover from the economic pain caused by coronavirus.
Italy’s 10-year government bond yield, the benchmark for the cost of borrowing in Europe’s third-largest economy, fell 0.09 percentage points to 1.15 per cent. The decline, which is the biggest since early June, reflects rising prices for the debt.
The gap between 10-year Italian and German government bond yields also narrowed to the lowest level since late March. The spread is seen as an indicator of market sentiment towards the bloc’s more financially vulnerable nations.
Yields on the debt of other big eurozone borrowers, including Spain and Portugal, also declined on Monday.
After days of haggling over the recovery fund, which has pitted the leaders of a group of richer countries against those nations hardest hit by the pandemic, Dutch prime minister Mark Rutte and Austrian chancellor Sebastian Kurz expressed optimism about breaking the logjam.
In currencies, the euro early on Monday hit a four-month high against the US dollar. However, those gains cooled during the afternoon session.
The composite Europe Stoxx 600 ended the day 0.8 per cent higher after a muted reaction early in equity markets. Germany’s Dax was up 1 per cent while the CAC 40 in Paris rose 0.5 per cent. Milan’s FTSE MIB rose 1 per cent.
In London, the FTSE 100 slipped 0.5 per cent, with British Airways owner IAG and online retailer Ocado among the biggest fallers. One of the FTSE’s best performers was drugmaker AstraZeneca, up 1.5 per cent amid a burst of enthusiasm about coronavirus vaccines that caused shares in biotech group Synairgen to rise more than five times, or 420 per cent. Its shares closed at 190p, up from Friday’s 36.5p.
The experimental coronavirus vaccine developed by Oxford university and AstraZeneca has generated “robust immune responses” and was tolerated by all patients in the first phase of its clinical trials.
In Asia, China’s CSI 300 index of Shanghai and Shenzhen-listed stocks jumped 2.6 per cent on indications that Beijing was taking steps to support a recent rally in equities. Regulators said on Friday that they would allow insurers to invest more of their assets in the stock market.
“There’s a lot of speculation of more policy [support] coming for . . . the buildings materials sector,” said a director at one mainland brokerage.
But Hong Kong’s Hang Seng index closed flat as the city indicated a fresh wave of coronavirus infections. Japanese stocks were weighed down by data showing exports in June fell by a faster rate than forecast by economists.