* 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
after a survey showed German business morale rebounded in May,
while investors kept a close eye on escalating U.S.-China
tensions in a thin trading session.
MSCI's gauge of world stocks .MIWD00000PUS gained 0.4%,
nearing a 2-1/2 month high. The pan-European STOXX 600 index
.STOXX and U.S. stock futures ESc1 were up around 1% each.
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, where Prime Minister Shinzo
Abe lifted the state of emergency for Tokyo and four remaining
areas on Monday - although he warned that it could be reimposed
if the new coronavirus started spreading again.
The government is also considering fresh stimulus worth 100
trillion yen ($930 billion). 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
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.
Italian bonds showed little reaction to an expected
counter-proposal from more hawkish states to France and
Germany's 500 billion euro recovery fund proposal, holding near
six-week lows hit on Friday. IT10YT=RR
The euro steadied around the $1.09 levels, recovering from
earlier losses, as the focus shifted to a proposal the European
Commission is expected to put forward on Wednesday.
Oil prices, which had been driven higher for the past four
weeks, were steady on Monday, with U.S. crude oil up 0.75% to
$33.49 a barrell Clc1 and Brent up around 0.2% to $35.21
LCoc1
Spot gold was off 0.3% at $1,728.1 an ounce XAU= .
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