World shares climb as China industrial data offers hope for coronavirus recovery

LONDON (Reuters) – European stocks rose on Monday as industrial activity in China gained strength. This is another sign of recovery from the coronavirus pandemic, which added to hopes that the global economy will recover too.

FILE PHOTO: A man wearing a protective face mask after the coronavirus disease (COVID-19) outbreak walks in front of a stock board in front of a stockbroker in Tokyo, Japan on May 18, 2020. REUTERS / Kim Kyung-Hoon / File Photo

The broader Euro STOXX 600 rose 0.6%, with the London-based FTSE .FTSE gaining 1% and European oil and gas stocks .SXEP gaining 2% due to rising oil prices.

Shares in BP (BP.L.) and Royal Dutch Shell (RDSa.L) rose after Saudi Aramco (3.4% and 2.7% respectively) (2222.SE) was optimistic about a growth in Asian demand and Iraq promised to further reduce supply. (OR)

Deflation in China's factories eased in July, data showed, driven by a surge in global energy prices and a surge in industrial activity to pre-coronavirus levels.

Industrial production in the world's second largest economy is steadily returning to levels seen before the pandemic that paralyzed large swaths of the economy, fueled by pent-up demand, government incentives and surprisingly resilient exports.

This bodes well for the global recovery from the coronavirus pandemic, according to market participants.

"China is so far ahead in this lockdown and lockout process that good indicators for the Chinese economy (for the global economy) are essential," said Florian Ielpo, head of macroeconomic research at Unigestion.

The MSCI World Equity Index .MIWD00000PUS, which tracks stocks in 49 countries, gained 0.1%. Wall Street futures meters ESc1 pointed to a positive start.

However, progress has been controlled by tension between the United States and China. The uncertainty about a deal with a US stimulus package also weighed on the markets

US President Donald Trump signed executive orders to ban the Chinese social media platforms WeChat – owned by Chinese tech giant Tencent (0700.HK) – and TikTok starting next month, imposing sanctions on 11 officials from Hong Kong and China.

The US regulators also recommended that foreign companies listed on American stock exchanges be subject to public scrutiny by the US from 2022.

Tensions between the US and China have raised fears of a negative impact on trade talks. Any friction here could make the global recovery from the coronavirus pandemic difficult, investors said.

European technology stocks .SX8P underscored concern and lost 0.8% on tension between Washington and Beijing, the only sector to decline in early trading.

Previously, Asian stocks outside of Japan .MIAPJ0000PUS had volatile trading and remained below a six and a half month high hit last week. They were last up 0.1%.

Waiting for Washington

The ongoing talks in Washington about a US stimulus package that has weighed on the US dollar are causing further uncertainty for investors.

House spokeswoman Nancy Pelosi and Treasury Secretary Steven Mnuchin said Sunday they were open to resuming relief talks.

Trump has tried to take matters into his own hands, signing executive orders and memoranda aimed at unemployment benefits, evictions, student loans and payroll taxes.

FILE PHOTO: A face-masked pedestrian walks near an overpass with an electronic board showing inventory information following a coronavirus disease (COVID-19) outbreak in Lujiazui financial district in Shanghai, China on March 17, 2020. REUTERS / Aly Lied

Amid investor concerns that the US recovery may lag other major economies, the dollar's two-year supremacy has fallen.

Against a currency basket, the dollar was a fraction firmer at 93.339 = USD and still just above a two-year low.

"The new incentive that President Trump has given through executive orders is better than none and offers a stop-gap solution," write analysts at MUFG in London.

Reporting by Tom Wilson, Editing by Larry King

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