Asian equities gained as investors shrugged off worries regarding the escalating US-China tensions and raised their hopes on a potential Covid vaccine proposed by the American biotech company Novavax, which has just started human tests.
The Nikkei and ASX 200 rallied 2.63% and 2.32% respectively. Hang Seng rebounded 1.87% as China promised that the new national security law as proposed won’t change the ‘one country two systems’ policy – which is crucial for international businesses operating in Hong Kong, while Shanghai’s Composite advanced 0.70%.
Solid purchases in US, UK and European futures also hint at a strong positive open on Tuesday.
The US dollar index slipped below the 100 level as a sign of improved market sentiment, though the vaccine hopes tend to be ephemeral and the risk of a sudden reversal in risk appetite looms.
The most important to investors is the steady decline in coronavirus cases as economies gradually restart operating. The major risk to the medium-term recovery is a second wave of contagion, which could threaten the already-weakened businesses. All other worries, including the US-China tensions are dwarfed and shouldn’t have a meaningful impact on steadily bettering global risk appetite.
The yen is down for the third trading day and the Swiss franc is stable near the 0.97 level against the greenback.
But gold traders have a steady grip near the $1725 an ounce as a hedge against the risk of a sudden slump in risk sentiment. The latest developments between the US and China could jeopardize the recent advance in risk assets and pull capital back to gold. But if the market proves resilient to US-China threats, gold could give in to top-selling pressures and retreat toward $1700/1680 area.
Meanwhile, both the euro and the pound benefit from a softening US dollar to recover a part of recent losses.
