June 2, 2020 / 8:17 AM / a month ago

MORNING BID-Full steam ahead

A look at the day ahead from Karin Strohecker, chief correspondent, emerging markets. The views expressed are her own.

The stocks rally is steaming on, fuelled by optimism over the re-opening of economies around the world.

Markets appear unfazed by President Donald Trump's call to use the military to deal with protests across the United States over the death of George Floyd. They are also looking past news China asked state-owned companies to stop buying U.S. soy beans over the two countries' differences over Hong Kong.

The U.S. protests do have the capacity to set back plans to re-open the economy. Trump's stark message failed to stop looting, with a strip mall in Los Angeles being set ablaze, yet Wall Street closed higher on Monday.

This morning, Asian stocks sailed higher while European markets opened at three-month highs, with many playing catch-up after a long weekend break. However, U.S. futures point to a softer open for Wall Street.

The dollar index has slipped two-and-a-half-month lows. The euro continues to gain over the euro zone's 750 billion-euro rescue plan and before the European Central Bank's Thursday meeting, which is expected to add to emergency stimulus scheme.

Sterling has been a surprise winner of late, rising to a one-month high against the dollar. It's risen five out of the past six sessions, even as Britain and the European Union traded barbs over Brexit. With more talks on the agenda today, the UK is expected to indicate willingness to compromise on some rules if the EU backs off from demands on regulations and fishing access.

Hopes of economic activity resuming lifted oil prices near two-and-a-half-month highs as well, as traders waited to see whether major energy producers might agree this week to extend their output cuts to shore up prices.

In European equities, German shares jumped 2.5% to their highest since early March, while the pan-European STOXX 600 benchmark rose 1% to reclaim early-March highs.

Today's star is Lufthansa, whose shares are up 8% after approving a 9 billion-euro government bailout. There are moves too in the battered auto industry -- Fiat Chrysler plans to list its robot-making business while Volkswagen is closing its $2.6 billion investment in self-driving startup Argo AI.

In energy, Seadrill has written down the value of its drilling rigs by $1.2 billion and hired advisers to evaluate a restructuring that could allow it to reduce its debt.

In more signs of European readiness to invest, French retailer Carrefour is buying Wellcome Taiwan to expand in convenience stores. Italian eyewear billionaire Leonardo Del Vecchio has requested clearance to double his stake in Mediobanca.

In emerging markets, China has introduced more stimulus -- the central bank will start buying local lenders' bank loans to prod banks to lend up to 1 trillion yuan ($140.18 billion) to small businesses.

South Korean shares closed up 1% as data showed the economy shrank by a seasonally adjusted 1.3% in the January-March period from the previous quarter, better than expected. Indian shares advanced as well after a surge in retail and hotel stocks offset a sovereign ratings downgrade by Moody's to a notch above junk.

Argentina extended the deadline to negotiate with creditors to June 12 and said it may sweeten its restructuring offer.

Editing by Larry King

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