World shares strode to four-month highs on Wednesday as hopes for a coronavirus vaccine offset rising US-China tensions and helped lift the euro and oil prices too.
Asian markets were choppy after more barbs between Beijing and Washington over Hong Kong, but gains of around 2 percent in European bourses and a solid advance on Wall Street set aside concerns about the still growing number of COVID cases.
An experimental vaccine produced by Moderna Inc drew safe immune responses in all 45 healthy volunteers, an early stage trial showed on Tuesday. There were reports on Wednesday that a separate University of Oxford trial was also looking good.
US Treasury yields rose and the yield curve steepened, indicating a wider spread between long- and short-term interest rates, as vaccine hopes boosted risk appetite and surprising data released on Wednesday added to the optimism.
US industrial production, manufacturing output and plant capacity rose more than expected in June and there was a bigger- than-expected draw in US crude and refined products last week.
“The market is trading fairly ‘risk on’ on vaccine hopes,” said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York. “It’s largely COVID news driving the price action recently.”
Europe's broad FTSEurofirst 300 index advanced 1.78 percent, while on Wall Street, the Dow Jones Industrial Average rose 0.74 percent, the S&P 500 gained 0.66 percent and the Nasdaq Composite added 0.13 percent.
Moderna surged 10.2 percent to a record high after a small-scale study showed its experimental vaccine produced high levels of virus-killing antibodies, bolstering hopes it could prove effective in later stages of testing.
Hopes of progress this week towards a deal on the European Union’s 750 billion-euro COVID recovery fund helped sentiment in Europe. The euro traded above $1.1430 for the first time since March, and Italy and Spain’s bond market borrowing costs came down again.
The euro was last up 0.18 percent at $1.1416.
Chinese shares fell 1.3 percent and Hong Kong ended flat, after US President Donald Trump ordered an end to Hong Kong's special status under US law to punish China for its "oppressive actions" against the former British colony.
That prompted a retaliatory warning from China’s foreign ministry that “Hong Kong affairs are purely China’s internal affairs and no foreign country has the right to interfere”.
Japan's Nikkei and Australia's benchmark index remained upbeat, finishing up 1.6 percent and 1.9 percent, respectively.
Investment bank Goldman Sachs was also pointing higher after reporting higher quarterly profits following the COVID crisis trading boom. JPMorgan, Citi and Wells Fargo had reported huge Q2 profit drops on Tuesday and set aside a collective $28 billion for loan losses.
The dollar was on the defensive, particularly against risk-sensitive currencies, following the news of progress in vaccine development.
Sweden's crown SEK= vaulted to its highest versus the greenback since February 2019 and the risk-sensitive Australian dollar popped to a one-month high at $0.70.
The Bank of Japan kept its monetary policy steady, as expected, on Wednesday though it warned that uncertainty over the economic outlook was “extremely high” due to various risks, including rising coronavirus infections in Tokyo, which was put on “red alert” on Wednesday.
Oil rose on the sharp drop in US inventories, but further gains were limited as the Organization of the Petroleum Exporting Countries and allies are set to ease supply curbs from August as the global economy recovers from the pandemic.
Brent crude LCOc1 rose 1.1 percent at $43.37 a barrel. US crude CLc1 advanced 1.04 percent at $40.71 a barrel.