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Asia: Equities build on rally as US jobs data fans recovery hopes
[HONG KONG] A blockbuster US jobs report that fanned optimism over the economic recovery from the coronavirus crisis helped push stock markets even higher Monday, while a decision to extend production cuts provided fresh support to oil prices.
As countries continue to ease lockdown measures and with trillions of dollars in stimulus and central bank support pledged, equities across the planet have surged since hitting a trough in March.
And the release of data Friday showing a staggering 2.5 million US jobs were created in May - compared with an expected loss of more than eight million - added to the optimism, pushing the Nasdaq and S&P 500 on Wall Street to within spitting distance of record highs.
Canada also reported a surprise increase in employment, confounding forecasts for a big drop.
"While there are still significant uncertainties over the Covid-19 impact on corporate earnings, investors are encouraged by the reopening of economies that is likely to lead to a rebound in profitability later this year," Iyad Abu Hweij, of Allied Investment Partners PJSC, said.
In early trade Hong Kong rose 0.7 per cent, marking a fifth straight gain, while Tokyo went into the break 0.9 per cent higher as figures showed Japan's economy shrank less that feared in the first three months of the year.
Shanghai gained 0.4 per cent, Seoul rose 0.2 per cent and Singapore put on 0.8 per cent. Wellington soared more than two per cent after officials reported no active cases of covid-19 for the first time since the pandemic began.
Taipei, Manila and Jakarta were also higher. Sydney was closed for a holiday.
"In a year of almost unmitigated disaster, the May jobs report was a pleasant surprise," David Kelly, of JP Morgan Asset Management, said.
Jason Wong at BNZ markets added: "The data are consistent with activity indicators that show a recovery in activity as US lockdowns eased, following the big hole in the economy in April, and give increased confidence that activity is on a clear path upward from here as restrictions have eased further."
As Latin America is hit by a spike in infections and deaths, Europe continues to reopen to some semblance of normality, providing a much-needed boost to the shattered tourism industry.
Adding to the positive sentiment was news that major oil producers had agreed to extend output cuts of almost 10 million barrels a day for another month through to the end of July.
The deal, which had been expected, provided further support to crude prices, which have surged over the past two months thanks to the cuts and the easing of lockdowns that has boosted demand.
The agreement "is hugely positive for sentiment as the presumption is this clampdown will accelerate the rebalancing of supply and demand", said AxiCorp's Stephen Innes.
"The recognition that the deep cuts need to continue for a month or perhaps longer shows that despite the recent surge in oil prices, the large producers remain worried about the fragile state of the oil markets."