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Asian stocks set to follow U.S. jobs rally, China in focus

NEW YORK (Reuters) – Asian stocks were likely to track a firmer Wall Street session on Friday after strong U.S. jobs data although growing Sino-U.S. tensions and a worrying surge in coronavirus cases is likely to cap gains.

Japan’s Nikkei 225 futures rose 0.45% and Australia’s S&P/ASX 200 futures climbed 0.58%.

E-mini futures for the S&P 500 rose 0.14%.

“While June data reflected a big improvement in the U.S. labor market, the recent sharp acceleration in new virus cases plus the prospect of an end to unemployment benefits by the end of July are two big layers of uncertainty,” said NAB Markets analyst Rodrigo Catril, adding that the uptick in U.S. cases could mean extended headwinds for the labor market.

Wall Street ended Thursday higher following a record increase in payrolls and a decline in unemployment. U.S. markets are closed on Friday in observance of Independence Day.

However, investor focus is shifting to worsening strains between China and the United States.

More than 75 U.S. members of congress sent a letter to the President Donald Trump urging him to take make a formal determination on whether China’s treatment of Muslim Uighurs and other groups constitutes an atrocity.

The U.S. State Department also warned American companies including Amazon.com Inc, Walmart Inc and Apple Inc to check their supply chains and ensure they are not doing business with entities linked to alleged human rights abuses against Uighurs in China’s Xinjiang province.

Separately, Congress passed legislation seeking to punish banks that do business with Chinese officials who implement Beijing’s draconian new national security law on Hong Kong.

MSCI’s gauge of stocks across the globe gained 0.92%. The Dow Jones Industrial Average rose 0.36%, the S&P 500 gained 0.45% and the Nasdaq Composite added 0.52%.

The positive economic data also pushed oil prices higher.

Brent crude futures settled at $43.14 a barrel, rising $1.11, or 2.6%. U.S. West Texas Intermediate (WTI) crude futures settled at $40.65 a barrel, up 83 cents, or 2.1%.

Investors still embraced the safe-haven dollar and gold, which usually rise when risk appetite declines, as an acceleration in new COVID-19 cases across the country prompted fresh restrictions.

The dollar index rose 0.058%, with the euro up 0.01% to $1.1239.

The Japanese yen weakened 0.02% versus the greenback at 107.53 per dollar, while sterling last traded at $1.2468, up 0.02% on the day.

Spot gold rose 0.4% to $1,777.04 per ounce

U.S. Treasury yields ended the day lower ahead of the July 4 long weekend, with the benchmark 10-year yield fell 1.1 basis points at 0.6709%.

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U.S dollar gains on worries about resurgent coronavirus pandemic

NEW YORK (Reuters) – The U.S. dollar rose on Thursday, regaining its safe-haven appeal, as investors worried that the resurgence of U.S. coronavirus cases could erase the summer’s employment gains.

U.S. financial markets closed on Friday for the July 4th Independence Day holiday.

In early trading, the dollar fell as risk appetite increased after data showed the world’s largest economy created jobs in June at a far faster pace than market forecasts. But that optimism waned on reports of more U.S. cases of COVID-19.

Florida reported more than 10,000 new cases, the biggest daily increase in the state since the pandemic started, according to a Reuters tally.

A day earlier, the number of cases nationwide shot up by nearly 50,000, the fourth record rise in infections in the last seven days, following moves in many states to allow businesses to reopen from strict shutdowns.

“Dollar performance will hinge on the U.S. response to COVID,” said Juan Perez, senior currency trader at Tempus Inc. in Washington. “On that end, the U.S. is losing because the situation is far more difficult than in other parts of the world.”

Despite Thursday’s rise, the greenback posted its second straight week of losses against a basket of major currencies.

In early trading, the dollar hit session lows against the euro and held onto losses against a major currency basket after data showed that U.S. nonfarm payrolls increased by 4.8 million jobs in June, the most since the government started keeping records in 1939.

Payrolls rebounded 2.699 million in May. Economists polled by Reuters had forecast payrolls increasing by 3 million jobs in June.

The unemployment rate fell to 11.1% last month from 13.3% in May, diminishing the dollar’s appeal as a safe haven.

That said, Dave Rosenberg, chief economist and strategist at Rosenberg Research said it was important to put some perspective to the jobs report.

He said the survey took place in the week in June where every state had re-opened and “all you have to do in the payroll survey to be counted as ‘employed’ is to have worked just one hour in the survey week.”

“We know that since then, around 40% of the states have now been forced to halt, or curtail their re-opening phases with the renewed jump in the coronavirus case count, so we shall see what July brings a month from now,” Rosenberg added.

In afternoon trading, the dollar index rose 0.1% to 97.269 =USD, as the euro fell 0.1% versus the greenback to $1.1235 EUR=EBS.

Despite the dollar’s recent spell of weakness, the greenback was still up about 2.5% from the 2020 low of 94.6 in the dollar index hit in early March. A Reuters poll predicts more weakness for the greenback over the next 12 months due to weak global demand.

The dollar gained 0.1% against the yen to 107.54 yen JPY=EBS.

(This story corrects typographical error in first paragraph; removes second bullet point)

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Cyclical rally, U.S. jobs data drive European stocks to one-week high

(Reuters) – European shares closed at a one-week high on Thursday as hopes of a COVID-19 vaccine and a better-than-expected rebound in U.S. hiring overshadowed concerns about surging coronavirus infections.

The pan-European STOXX 600 rose 2%, easing slightly from highs hit after data showed the U.S. economy created a record 4.8 million jobs in June as more restaurants and bars resumed operations.

Banks .SX7P were the top gainers in Europe, jumping 4.3% to mark their best day since June 5, while other cyclical sectors such automakers .SXAP, chemicals .SX4P and insurance companies .SXIP gained between 2.5% and 3.4%.

Equity markets started the second half of the year on a positive note earlier this week, as a COVID-19 vaccine developed by German biotech firm BioNTech (BNTX.O) and U.S. giant Pfizer (PFE.N) was found to be well-tolerated in early stage human trials, while business surveys showed a slump in global manufacturing eased in June.

“The market response is likely to be positive, but inevitably tinged with growing concerns that the recovery is already losing steam,” said Seema Shah, chief strategist at Principal Global Investors.

“With the closings having been reversed or paused across 40% of the U.S., July’s job report may paint a much weaker story.”

Raising risks of fresh lockdowns, new U.S. cases of COVID-19 jumped nearly 50,000 on Wednesday, according to a Reuters tally, marking the biggest one-day rise since the start of the pandemic.

Further adding to concerns, Britain and the European Union failed to make progress in talks on post-Brexit relations this week due to major differences, officials said.

Among individual movers, Associated British Foods (ABF.L) gained 4.1% after saying trading in its Primark fashion stores that reopened after the lockdown has been “reassuring and encouraging”.

Scandal-hit Wirecard (WDIG.DE) slumped 35.4% after police and public prosecutors raided its headquarters in Munich and four properties in Germany and Austria.

Dutch construction company BAM Groep (BAMN.AS) dropped 11.6% as it warned of a “significant” loss in the first half of the year.

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Taking EU helm, Germany's Merkel calls on Europe to show resolve

BERLIN/BRUSSELS (Reuters) – German Chancellor Angela Merkel has urged European Union leaders to reach agreement on a multi-billion euro coronavirus recovery fund, calling for resolve and saying Europe was facing the most difficult situation in its history.

Echoing Merkel’s urgency as Germany took the helm of the bloc, the EU’s chief executive Ursula von der Leyen joined the chancellor via video link to warn that the next six months were crucial after the region reacted slowly to the coronavirus and now faced a severe economic downturn.

“We are clear where the difficulties are but we all know it would be good if we agree in July. If we need more time it would be a less good variant,” Merkel said, also referring to plans for the new seven-year EU budget.

“There must be a deal in the summer, I cannot imagine any other variant so we will work very hard to show a sign of our resolve. We know that Europe is in the most difficult situation in its history,” she told a news conference.

With almost 35,000 deaths from COVID-19 recorded in Italy alone, lockdowns across most of the European Union have shuttered businesses, upended livelihoods and indebted governments as they seek to shield workers.

A Commission proposal for a 750 billion euro ($843.08 billion) rescue fund has been largely welcomed by EU leaders but must still be agreed, and fiscally conservative northern countries led by the Netherlands are loath to see their taxpayers pay for grants to southern European states.

“In such times, solidarity is a test,” Merkel said, in a veiled reference to frustration across Italy and Spain, the EU countries most affected by the novel coronavirus and which have questioned the value of the union in the crisis.

Although the rotating, six-month presidency gives only limited power, as Europe’s most respected leader Merkel faces huge expectations that she can negotiate a breakthrough on the recovery fund and a new 2021-2027 budget for the bloc.

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Dollar wobbles as decent U.S. data tempers safe-haven demand

NEW YORK (Reuters) – The dollar retreated on Wednesday in choppy trading, as generally solid U.S. economic data and improving European numbers diminished its appeal as a safe haven, though the currency’s outlook remained upbeat given renewed risks posed by the novel coronavirus.

The greenback kicked off the third quarter with a decline against currencies that perform well in times of risk appetite such as the Australian, New Zealand, and Canadian dollars. It also fell against the euro and sterling.

Analysts said the dollar could still gain, with the resurgence of COVID-19 cases and the potential for renewed lockdowns in U.S. states deemed hot spots.

“In a service economy like the U.S., those that generate the highest number of jobs are in the high-contact businesses such as restaurants, movie theaters, and exhibition parks, which I think will come to a grinding halt,” said Boris Schlossberg, managing director at BK Asset Management in New York.

“There’s a significant risk of reclosing some of the states. There’s still a lot of risk-off flows, and the dollar could be the beneficiary of those flows,” he added.

Also on Wednesday, the Federal Reserve released the minutes of its last policy meeting and said the U.S. economic outlook remains highly uncertain and reiterated that a full economic recovery hinges on the virus being under control.

The dollar briefly extended losses against the yen and euro after the minutes.

“The minutes underlined the message from the economic projections that officials are fairly downbeat about the economic outlook,” said Andrew Hunter, senior U.S. economist at Capital Economics.

The dollar, meanwhile, reacted little to the ADP National Employment Report, which showed June private payrolls increased by 2.369 million jobs. Data for May was revised upward to show payrolls surging 3.065 million, tracking a surprise rebound in job reported by the government, instead of tumbling 2.76 million as previously estimated.

The dollar did lose ground as a safe haven, after U.S. manufacturing data showed a reading of 52.6, suggesting an expansion for the month of June.

In Europe, IHS Markit’s final euro zone Manufacturing Purchasing Managers’ Index moved closer to the 50 mark separating growth from contraction in June.

In afternoon trading, the dollar was down 0.3% against a basket of currencies =USD at 97.15.

Although the dollar has acted as a haven currency for much of the pandemic, U.S. fundamentals have also played a major role, meaning it can appreciate on better-than-expected data.

Against the yen, the dollar fell 0.4% to 107.47 yen JPY=EBS. Analysts said the yen’s rise was safe haven-related given declining stock markets, especially in Asia.

The euro, meanwhile, rose 0.2% to $1.1248 EUR=EBS. The currency rallied 6% against the dollar in May and early June.

The Australian AUD=D3 and New Zealand dollars NZD=D3 both rose against the greenback.

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Business

European stocks end choppy session higher on vaccine hopes

(Reuters) – Hopes of a COVID-19 vaccine pulled European stocks from losses earlier on Wednesday, after fears of a no-deal Brexit and anxieties relating to the European Union’s recovery fund had weighed on sentiment.

Ending a choppy session, the pan-European STOXX 600 index rose 0.2%, with blue-chip indexes in Paris .FCHI, Milan .FTMIB and London .FTSE down about 0.2%

Markets on both sides of the Atlantic got a boost as a COVID-19 vaccine developed by Pfizer Inc (PFE.N) and German biotech firm BioNTech (BNTX.O) showed promise and was found to be well tolerated in early-stage human trials.

A series of business surveys released earlier showed broad improvements in manufacturing across Europe and Asia as economies opened up, with IHS Markit’s final euro zone Manufacturing Purchasing Managers’ Index (PMI) moving closer to the 50-mark separating growth from contraction in June.

Improving economic data out of the United States also buoyed sentiment.

“The coronavirus vaccine news coupled with ADP datapoint are acting as positive catalysts, lifting investor sentiment,” said Stephane Ekolo, a strategist at TFS Derivatives.

The STOXX 600 shed more than 1% in afternoon trading as German Chancellor Angela Merkel warned that there was a possibility that no deal would be agreed between the European Union and Britain, with “very limited” progress made in negotiations about their future relationship.

This comes as rating agency S&P Global cut its UK forecasts for the year again and warned of a possible “perfect storm” formed by a second wave of coronavirus infections and a no-deal Brexit.

Investors were also anxious about the European Union member states approving a 750 billion euro recovery fund at a summit later this month.

Morning trading in some European markets, including Germany’s DAX .GDAXI and Austria .ATX, was hit by a “technical issue” with the Frankfurt-based cash market system Xetra, exchange operator Deutsche Boerse (DB1Gn.DE) said.

After a nearly three-hour outage, the DAX was down 0.4% and the Austrian index rose 0.3%.

Among individual stocks, Swiss speciality chemicals maker Clariant (CLN.S) jumped 7% as it completed the $1.6 billion sale of its masterbatches unit to PolyOne Corp (POL.N), allowing the payment of a special dividend amounting to $3 per share.

Energy firms such as BP (BP.L) and Royal Dutch Shell (RDSa.L) rebounded from losses in the previous session as oil prices rose after a report showed U.S. crude stockpiles posted a bigger drop than expected. [O/R]

Travel & leisure stocks .SXTP were the top gainers.

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Business

Ryanair to cut 3,500 jobs if pay cuts not agreed: CEO

DUBLIN (Reuters) – Ryanair (RYA.I) is planning around 3,500 job losses if it cannot agree pay cuts with its staff, the airline’s boss Michael O’Leary said on Wednesday.

Europe’s biggest budget airline had previously said that it had cut more than 250 staff from its office around Europe and was looking at up 3,000 cuts among pilot and cabin crew. [nS8N2CP05S]

“We’ve already announced about 3,500 job losses but we’re engaged in extensive negotiations with our pilots, our cabin crew and we’re asking them to all take pay cuts as an alternative to job losses,” O’Leary told BBC.

“We’re looking from 20% from the best paid captains, 5% from the lowest paid flight attendants and we think if we can negotiate those pay cuts by agreement, we can avoid most but not all job losses.” O’Leary told BBC TV.

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Asian shares inch higher as data drives rebound hopes

(Reuters) – Asian stocks struggled for headway on Wednesday as the second half of the year got underway, with improving economic data offset by worries that surging coronavirus cases in the United States could derail the world’s recovery before it properly begins.

Following firm U.S. housing data and signs of a rebound in Europe’s economy, the latest boost to sentiment came from Chinese factory activity gathering steam in June, with the Caixin/Markit manufacturing PMI rising to 51.2 compared with expectations for 50.5.

But virus cases surged, too, with the U.S. recording 47,000 infections on Tuesday, its biggest single-day spike since the pandemic began.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4%, led by gains in Korea and China.

Japan’s Nikkei slipped 0.2%, though, U.S. stock futures fell 0.3% and gold sat close to an eight-year peak, pointing to elevated caution.

The moves follow a strong finish to the quarter on Wall Street and also a loss of momentum in recent weeks as U.S. infection rates have surged, with some states reimposing restrictions on business and personal activity.

The S&P 500 index rose 1.5% for an almost 20% gain over the past three months, fuelled by unprecedented central bank stimulus and hopes for a swift pandemic recovery, but it rose only 1.8% in June.

Coronavirus cases more than doubled in 14 U.S. states last month, a Reuters analysis showed, and fears are growing that the caseload could prompt fresh lockdowns.

“Clearly we are not in total control right now,” the country’s top infectious disease expert, Anthony Fauci, told a Senate committee on Tuesday, adding that cases could increase by as much as 100,000 daily if the outbreak is not contained.

The surge has prompted California, Texas and Florida to shut recently re-opened bars in the last few days, while Australia has locked-down parts of its second-biggest city, Melbourne, to try and stop a spike in cases there.

“The rise in COVID-19 infections is now triggering a reversal on the reopening strategy,” said Rodrigo Catril, senior FX strategist at National Australia Bank in Sydney.

“It remains to be seen if the U.S economy will continue to surprise over the coming month.”

The U.S. government bond market remains in a cautious mood. Yields on benchmark 10-year government debt rose overnight to 0.6774%, but finished the quarter steady. [US/]

UNWELCOME DEVELOPMENTS

On top of virus worries, China’s introduction of sweeping new laws to crack down on dissent in Hong Kong also has investors eying geopolitical tensions with trepidation.

The laws have already prompted Washington to begin dismantling Hong Kong’s special status under U.S. law.

“It has not taken people by surprise, but it’s an unwelcome development,” said Imre Speizer, a foreign exchange strategist at Westpac in Auckland. “It’s one of a number of geopolitical factors which is a negative for some asset classes now.”

Currency markets were in a holding pattern ahead of the next slew of data due to provide a snapshot of the U.S. recovery.

The dollar held gains against most majors and slipped on the safe-haven yen, last buying 107.68 yen and trading at $0.6909 per Australian dollar. [FRX/]

U.S. manufacturing activity data due later in the day,is forecast to show a recovery from a 11-year low in April while the non-farm payrolls report on Thursday is expected to show the economy added 3 million jobs in June.

Elsewhere sterling rebounded from near a one-month low on Tuesday and hung on to most of that ground at $1.2382.

Gold hovered near an 8-year high at $1780.64 an ounce. Brent crude rose 43 cents or 1% to $41.70 a barrel, while U.S. crude was up 1.3% at $39.76 a barrel.

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Global shares up on U.S. consumer data but COVID-19 spike dampens sentiment

NEW YORK (Reuters) – A global stocks index rose on Tuesday as investors continued to look for signs of an economic recovery while Treasury debt prices were little changed amid a fog of rising COVID-19 cases.

The possible return of Libyan oil production, which has been at a trickle since the start of the year, weighed on crude prices.

World shares are down around 8% so far this year, including the impact of a slump of 34% between Feb. 12 and March 23, but the world equity index is up 18% this quarter – on track for its biggest three-month gain since the second quarter of 2009.

U.S. consumer confidence rose more than expected in June, following upbeat housing data on Monday.

Some traders said quarter-end flows were also supportive of stock prices. Following a steep drop in February and March, Wall Street was setting up to close the quarter with the largest gains since 1998.

“We are finishing up one of the best quarters in history, so we wouldn’t be surprised to see a little bit of window dressing taking place on the last day,” said Sal Bruno, chief investment officer at IndexIQ in New York.

The Dow Jones Industrial Average rose 32.86 points, or 0.13%, to 25,628.66, the S&P 500 gained 29.88 points, or 0.98%, to 3,083.12, and the Nasdaq Composite added 141.35 points, or 1.43%, to 10,015.50.

The pan-European STOXX 600 index rose 0.13% and MSCI’s gauge of stocks across the globe gained 0.76%.

Emerging market stocks rose 0.25%. Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.74% higher, while Japan’s Nikkei futures lost 0.22%.

Rising COVID-19 cases continue to show signs of a second deadly wave of the pandemic, but markets still expect a global economic recovery as lockdown measures ease.

Brent crude slipped as traders took profits from the previous session and Libya’s state oil company flagged progress in talks to resume exports, potentially boosting supply. [O/R]

U.S. crude recently fell 1.06% to $39.28 per barrel and Brent was at $41.14, down 1.37% on the day.

The dollar index was in and out of negative territory as upbeat U.S. and Chinese data left traders torn between optimism about global growth and fears that a surge in new COVID-19 cases could jeopardize the rebound.

The dollar index fell 0.053%, with the euro down 0.04% to $1.1235.

The Japanese yen weakened 0.31% versus the greenback at 107.89 per dollar, while sterling was last trading at $1.2387, up 0.74% on the day.

Beijing unveiled the national security law it is imposing on Hong Kong, setting the stage for the most radical changes to the former British colony’s way of life since it returned to Chinese rule 23 years ago.

“This doesn’t improve Hong Kong’s status as a financial center, to say the least, coming back from the protests and the virus over the last year,” said Ilan Solot, FX strategist at Brown Brothers Harriman in London. “If anything this is a downward slope for Hong Kong’s importance as a global financial hub.”

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European shares fall as optimism from Asian session falters

LONDON (Reuters) – European shares edged down, oil fell and the dollar erased some gains on Tuesday, with little of the optimism of the Asian session extending into early London trading, as markets took stock at the end of the first half of 2020.

The MSCI world equity index, which tracks shares in 49 countries, was up about 0.1% at 0830 GMT, after Asian shares rose on strong data from the U.S. housing market and Chinese factories.

World shares are down around 8% so far this year, having slumped 35% between Feb. 20 and March 23 in the most destructive sell-off since the Great Depression. But the world equity index is up 17.5% this quarter – on track for its biggest quarterly gain since the third quarter of 2009.

Rising COVID-19 cases continue to show signs of a second deadly wave of the pandemic, but markets still expect a global economic recovery with lockdown measures easing.

Los Angeles has become a new epicentre in the pandemic as coronavirus cases and hospitalisations surge there despite California Governor Gavin Newsom’s orders requiring bars to close and residents to wear masks in nearly all public spaces.

“Asset markets are looking beyond COVID stats,” said Neil Jones, head of FX sales at Mizuho Bank. “There’s some expectation of containment and then, further down the line, an expectation of some form of measure to combat the virus.”

U.S. Federal Reserve Chair Jerome Powell said on Monday the outlook for the world’s biggest economy was “extraordinarily uncertain” and would depend both on containing the coronavirus and on government efforts to support the recovery.

European shares edged down on Tuesday, with the Euro STOXX 600 down 0.2%, having been relatively rangebound for the past two weeks.

London’s FTSE 100 was down 0.7%. Britain’s economy shrank by the most since 1979 in early 2020 as households slashed their spending, according to official data that included the first few days of the coronavirus lockdown.

Supported by end-of-quarter flows, the dollar rose overnight but steadied in early London trading, erasing early gains. At 0830 GMT it was at 97.59 against a basket of currencies, up 0.2% on the day.

“I would expect overall dollar demand to continue as we go into July,” Mizuho’s Neil Jones said.

“If there’s a summer lull then we may see a dollar sell-off into the elections but as we run up to the end of the year I would expect to see a resurgence of dollar demand,” he added.

The euro was down around 0.2% against the dollar, at $1.1221, while the riskier Australian and New Zealand dollars also edged down.

Oil prices slipped as traders took profits after sharp gains the previous session and Libya’s state oil company flagged progress in talks to resume exports, potentially boosting supply.

U.S. crude fell 1.5% to $39.12 a barrel, while Brent crude slipped 0.6% to $41.15 per barrel.

China’s parliament passed national security legislation for Hong Kong in response to last year’s pro-democracy protests. The United States, Britain and other Western governments have said the legislation erodes the autonomy the city was granted at its 1997 handover. Market reaction was limited.

Demand for safe German debt was little changed, with the 10-year government Bund yield at -0.474%, but demand for riskier Southern European debt declined somewhat.

Traders will be looking for pointers from euro zone flash inflation numbers, due at 0900 GMT, and from speeches by the ECB’s Isabel Schnabel, as well as the Bank of England’s Jon Cunliffe and Andy Haldane.

(Graphic: World FX rates in here)

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