Asia shares rally on vaccine hopes, oil retreats after early gains

Sydney/Hong Kong - Asian shares rose on optimism about a potential vaccine for the coronavirus after hopes for a US economic recovery in the second half of the year sent Wall Street into a rebound.

Asian shares extended gains on Tuesday as more countries emerged from their economic lockdowns and a successful early-stage trial of a coronavirus vaccine cheered sentiment, although oil shed some of its early moves higher.
The rally followed a firmer Wall Street lead after data from Moderna Inc's Covid-19 vaccine, the first to be tested in the United States, showed it produced protective antibodies in a small group of healthy volunteers.
The positive early test results boosted sentiment as investors wagered on a faster-than-expected economic recovery.
Many economies could post strong activity data from May as a result of easing restrictions, but the initial burst may give market participants a false sense of a return to normal, CBA said in a research note.
"We also expect economic recoveries to be uneven," it said in its global markets research note. "An economy would still be in a very deep recession even if economic activity is able to quickly return to 95per cent of 'normal' levels."
S&P 500 futures fell 0.03 per cent, while European markets were set to open higher with the pan-region Euro Stoxx 50 futures up 0.24 per cent and German DAX futures trading 0.29 per cent higher.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 1.8 per cent to two-week highs, after US stocks ended the previous session with gains. The index is, however, down 1.9per cent so far this month.
Australia's benchmark index and Hong Kong's Hang Sang were the lead gainers, up 2per cent each, South Korea added 2.3 per cent while China's blue-chip index climbed 0.8 per cent.
Japan's Nikkei added nearly 2 per cent to the highest since early March. On Wall Street overnight, the benchmark S&P 500 posted its biggest one-day percentage gain in almost six weeks, gaining 3.15 per cent. The Dow Jones Industrial Average rose 3.85 per cent and the Nasdaq Composite added 2.44 per cent.
However, analysts, for now, expect a steep contraction in world growth with the outlook for 2021 still uncertain with no approved treatments or vaccines for Covid-19 currently. Experts predict a safe and effective vaccine could take 12 to 18 months.
"It may be the case that central bank liquidity is chloroforming markets to overlook risks such as over leveraged corporate and government balance sheets, growing Covid-19 case numbers, growth holes and a slow recovery path," analysts at Perpetual wrote in a note.
The vaccine optimism sent treasury yields surging overnight as investors dumped bonds, while gold came off its peak. Spot gold was traded at $1,735.8486 per ounce.
Oil prices were mixed on Tuesday, with profit-taking paring Brent's early gains, while US crude extended its rally amid signs producers are cutting output as promised just as demand picks up. Brent crude fell 19 cents, or 0.6per cent, to $34.62 a barrel, after earlier touching its highest since April 9.
There was some good news in Europe, after France and Germany called for the creation of a 500 billion euro ($543 billion) Recovery Fund able to offer grants to the countries and regions hardest hit by the coronavirus crisis.
The euro hovered near a two-week top at $1.0907. The British pound was up 0.1per cent at $1.2201. The risk-sensitive Australian and New Zealand dollars also rose slightly. The safe-haven yen eased on the greenback to 107.38 per dollar.
- Reuters