Factory data, vaccine hopes power stocks higher; U.S. dollar dips

NEW YORK (Reuters) – A measure of stocks across the globe rose on Wednesday following a string of data pointing to a recovery in manufacturing, and on bets for a COVID-19 vaccine, while the risk-on mood pushed the U.S. dollar lower.

Germany’s manufacturing sector contracted at a slower pace in June, while activity in the United States hit a 14-month high. French factory activity rebounded into growth, and activity in China’s factories offered further signs that the world’s second largest economy may have passed the worst of the devastation caused by the pandemic.

Pfizer shares jumped 5% after a COVID-19 vaccine developed jointly with Germany’s BioNTech was found to be well tolerated, the fourth early-stage COVID-19 drug to show promise in human testing.

The news comes as a Reuters analysis showed coronavirus cases more than doubled in 14 U.S. states last month and fears are growing that the case-load could prompt fresh lock downs.

The Dow Jones Industrial Average rose 84.88 points, or 0.33%, to 25,897.76, the S&P 500 gained 23.43 points, or 0.76%, to 3,123.72 and the Nasdaq Composite added 102.07 points, or 1.01%, to 10,160.84.

The pan-European STOXX 600 index rose 0.24% and MSCI’s gauge of stocks across the globe gained 0.60%.

Emerging market stocks rose 0.70%.

Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.49% higher, while Japan’s Nikkei lost 0.75%. (Graphic: World financial markets in 2020, here)

The stronger data and vaccine news weighed on the dollar, which has been bid on days when traders are less risky.

“There’s definitely a risk-on tone to the market, which continues to bet on the fact that we’re past the worst point of COVID. But I think the jury is still out on that judgment,” said Boris Schlossberg, managing director at BK Asset Management in New York.

“There’s a significant risk of reclosing some of the states. There’s still a lot of risk-off flows, and the dollar could be the beneficiary of those flows,” he added.

The dollar index fell 0.309%, with the euro up 0.24% to $1.1258.

The Japanese yen strengthened 0.40% versus the greenback at 107.51 per dollar, while Sterling was last trading at $1.2485, up 0.69% on the day.

The global rise in manufacturing activity put a bid under energy prices, also supported by a bigger than expected drop in U.S. crude inventories.

“Largely we are moving forward in the way of demand and not backward, despite the negative view of coronavirus cases rising,” said Tony Headrick, energy markets analyst at CHS Hedging.

U.S. crude recently rose 1.58% to $39.89 per barrel and Brent was at $42.08, up 1.96% on the day.

Treasury yields also rose with the risk-on sentiment.

Benchmark 10-year notes last fell 9/32 in price to yield 0.6824%, from 0.653% late on Tuesday.

The 30-year bond last fell 25/32 in price to yield 1.4437%, from 1.411%.

Gold prices rose to their highest in 8 years at $1,788.96 an ounce, and recently dropped 0.8% to $1,767.06 an ounce.

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