GLOBAL MARKETS -World stocks win a respite, oil prices highest in over a month

GLOBAL MARKETS -World stocks win a respite, oil prices highest in over a month

Reuters  | May 15, 2020 19:10

GLOBAL MARKETS -World stocks win a respite, oil prices highest in over a month

* World shares up, but set for weekly drop
* Oil prices rally more than 3%
* German Q1 GDP falls 2.2% Q/Q
* Graphic: World FX rates in 2020

(Updates price action, adds data)
By Dhara Ranasinghe
LONDON, May 15 (Reuters) - World stocks edged higher on
Friday and oil prices rallied more than 2%, as sentiment revived
after a week pressured by deteriorating U.S.-China relations.
Oil prices rose to their highest levels in more than a month
LCOc1 CLc1 on signs that demand from China is picking up and
data showed China's industrial output in April expanded for the
first time this year. European shares were broadly higher, with stock markets in
London .FTSE , Paris .FCHI and Frankfurt .GDAX tracking
overnight gains in U.S. and Asian markets .N225
U.S. stock market futures however ESc1 1YMc1 were mixed,
highlighting a degree of caution among investors.
After a bruising week, a broad measure of European stocks
.STOXX was set to end the week 3% lower - the biggest weekly
fall since the mid-March rout in global stocks.
MSCI's world stock index .MIWD00000PUS , a touch firmer on
Friday, is down around 2.5% this week.
Analysts said this week's drop, while a natural correction
after a rally since mid-March, also reflected growing concerns
about rising U.S.-China tensions.
The Trump administration on Friday moved to block shipments
of semiconductors to Huawei Technologies HWT.UL from global
chipmakers, an action that could ramp up tensions with China.
U.S. President Donald Trump on Thursday signalled a further
deterioration in his relationship with China over the novel
coronavirus, saying he has no interest in speaking to President
Xi Jinping and suggesting he could even cut ties with Beijing.

"There is no doubt that the optics around the
trade/diplomacy backdrop have worsened in the last week and this
has had a negative influence," Chris Bailey, European strategist
at Raymond James in London, said.
"There has also been a subtle change in the perceptions of
market participants, for example the negative interest rate
debate getting a very good airing in the United States."
U.S. Federal Reserve Chair Jerome Powell has brushed off the
notion that the Fed could push rates below 0% after futures tied
to Fed interest rate policy expectations began pricing a small
chance of sub-zero U.S. rates within the next year. Two-year U.S. Treasury yields are trading at just 0.15%
US2YT=RR , while short-dated bond yields in Britain have dipped
back below 0% this week GB2YT=RR .
Faced with an exceptional hit from the coronavirus crisis,
central bankers are under intense pressure to do more to shore
up battered economies.
The German economy contracted by 2.2% in the first quarter,
its steepest three-month slump since the 2009 financial crisis
as shops and factories were shut in March to contain the spread
of the coronavirus, preliminary data showed on
Friday. "While the drop is smaller than during the worst quarter of
the financial crisis (Q1 2009), the most serious damage of
COVID-19 is yet to come," Florian Hense, an economist at
Berenberg, said.
On the currency markets, the euro was little changed at
around $1.0812 EUR=EBS , while the dollar dipped 0.15% to
107.05 yen JPY=EBS .
Britain's pound was about a third of a percent weaker
against the euro EURGBP=D3 and the dollar GBP=D3 , as the
focus turned to talks between Britain and European Union leaders
on their future relationship.
The Turkish lira TRY= was back below 7 per dollar and on
course for its best week since February as it recovers from
all-time lows.
Reuters reported that Turkey has reached out to various
countries for swap lines as it scrambles to try to shore up

MSCI world stock index, weekly change
Who will join the sub-zero rate club next?

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