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

* Asian stock markets: https://tmsnrt.rs/2zpUAr4
* MSCI ex-Japan jumps to highest since May 1
* Euro hovers near 2-week highs, yen weakens against dollar
* Coronavirus vaccine trial success sparks rally
* Oil retreats from 2-month high

By Swati Pandey and Sumeet Chatterjee
SYDNEY/HONG KONG, May 19 (Reuters) - 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 MRNA.O 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 95% of 'normal' levels."
S&P 500 futures ESc1 fell 0.03%, while European markets
were set to open higher with the pan-region Euro Stoxx 50
futures STXEc1 up 0.24% and German DAX futures FDXc1 trading
0.29% higher.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was up 1.8% to two-week highs, after U.S. stocks
ended the previous session with gains. The index is, however,
down 1.9% so far this month.
Australia's benchmark index .AXJO and Hong Kong's Hang
Sang .HSI were the lead gainers, up 2% each, South Korea
.KS11 added 2.3% while China's blue-chip index .CSI300
climbed 0.8%.
Japan's Nikkei .N225 added nearly 2% to the highest since
early March.
On Wall Street overnight, the benchmark S&P 500 .SPX
posted its biggest one-day percentage gain in almost six weeks,
gaining 3.15%. The Dow Jones Industrial Average .DJI rose
3.85% and the Nasdaq Composite .IXIC added 2.44%.
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 overleveraged
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 XAU= came off its peak.
Spot gold was traded at $1,735.8486 per ounce. GOL/
Oil prices were mixed on Tuesday, with profit-taking paring
Brent's early gains, while U.S. crude extended its rally amid
signs producers are cutting output as promised just as demand
picks up. Brent crude LCOc1 fell 19 cents, or 0.6%, 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 EUR=D3 hovered near a two-week top at $1.0907.
The British pound GBP=D3 was up 0.1% at $1.2201. The
risk-sensitive Australian and New Zealand dollars also rose
slightly.
The safe-haven yen JPY= eased on the greenback to 107.38
per dollar.

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