* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Yoruk Bahceli and Saikat Chatterjee
LONDON, May 25 (Reuters) - Stocks gained modestly on Monday
with many countries on holiday as German business morale
rebounded strongly in May, offering a glimpse of optimism to
battered investors of what lay beyond weeks of economic
lockdowns.
MSCI's gauge of world stocks .MIWD00000PUS gained 0.4%,
nearing a 2-1/2 month high. The pan-European STOXX 600 index
.STOXX was up 1.2%.
Lockdown measures introduced in mid-March have put the
global economy on track for a recession this year. Only
unprecedented stimulus by global central banks has held up world
markets in recent weeks.
With nervous investors wary of adding to their equity
holdings over concerns on what a post-lockdown world would look
like, Germany's Ifo institute survey for May gave some relief.
The index rebounded more than a Reuters poll expected in
May, recovering from its worst decline on record in April as a
reopening of Europe's largest economy boosted corporate
expectations. "The low point of the slump should now be behind us and
there even is the chance for a short-lived strong rebound in the
coming months," ING economists told clients.
But analysts voiced caution, given the uncertainty ahead
from the pandemic, with Ifo itself still expecting a
double-digit contraction in Europe's largest economy in the
second quarter. "We shouldn't probably overemphasize the data because we
have so much distortions from the coronavirus," said Jens Peter
Sorensen, chief strategist at Danske Bank in Copenhagen,
referring to difficulties survey respondents may face in
evaluating the impact of the pandemic on economic indicators.
More optimism came from Japan and Spain. Prime Minister
Shinzo Abe lifted the state of emergency for Tokyo and four
remaining areas on Monday while the government is also
considering fresh stimulus worth 100 trillion yen ($930
billion). Spain also announced it will lift a quarantine requirement
on overseas visitors from July 1, which may help its tourism
sector. In Europe, Italian 10-year bonds dropped to six-week lows
despite the uncertainty of what a final package might look like,
after a group of more hawkish states presented a paper against
France and Germany's 500 billion euro recovery fund proposal.
IT10YT=RR
The euro steadied around the $1.09 levels, recovering from
earlier losses, as focus shifted to the European Commission's
own proposal that is expected on Wednesday.
But with financial markets in Singapore, Britain and the
United States closed for public holidays on Monday, market moves
were relatively small and held within well-worn ranges.
CHINA-U.S. TENSIONS
Global stock markets were also set to make gains despite
signs of renewed strains in Sino-U.S. relations over the
weekend. China's move to impose a a new security law on Hong
Kong has heightened concerns about the stability of the city and
global trade prospects, and upset the United States.
The dollar, which tends to behave like a safe-haven asset
during market turmoil and political uncertainty, touched a
one-week high against its rivals in earlier trading, but erased
gains in late London trading. =USD
Ties between the two countries have deteriorated since the
coronavirus outbreak, over which they have exchanged accusations
of cover-ups and a lack of transparency.
"Rising tensions between the U.S. and China around Hong
Kong, trade policy and who is responsible for the 2020 economic
dislocation are threatening to end the post March-trough rally,"
said Perpetual analyst Matthew Sherwood.
Oil prices, which had been driven higher for the past four
weeks, were steady on Monday, with U.S. crude oil up 0.35% to
$33.62 a barrell Clc1 and Brent up around 0.4% to $35.36
LCoc1
Spot gold was off 0.2% at $1,730.1 an ounce XAU= .
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