GLOBAL MARKETS-Global shares, oil rally on vaccine hopes, lockdown easing

(Adds close of U.S. markets)
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* Stocks rally on potential COVID-19 vaccine
* Oil surges as easing of lockdowns spurs recovery hopes
* Gold hits seven-year peak, later slips on stock rally
* Euro gains on proposed Franco-German recovery fund
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By Herbert Lash
NEW YORK, May 18 (Reuters) - A gauge of global equity
markets surged almost 3% on Monday and oil rallied to highs last
seen in mid-April as data from an early-stage trial for a
coronavirus vaccine lifted hopes of a faster recovery from the
pandemic-driven economic slump.
Warm weather enticed people in countries across the world to
emerge from coronavirus lockdowns as centers of the outbreak
from New York to Italy and Spain gradually lift restrictions
that have kept millions cooped up for months. Investors have cheered any positive development by
drugmakers' vaccine trials amid fears of a second wave of
infections as restrictions are eased.
Drugmaker Moderna Inc MRNA.O said its experimental
COVID-19 vaccine showed promising results in a small early-stage
trial, and its stock closed up 20.0%. A workable vaccine that can be mass-produced by year-end or
early 2021 would be a "game-changer" for industries whose
challenges may not be resolved by the economy's reopening, said
Rick Meckler, partner at Cherry Lane Investments, a family
investment office in New Vernon, New Jersey.
Global economic output will take two or three years to
recover to pre-pandemic levels, IHS Markit said in a note,
projecting worldwide gross domestic product would fall 5.5% in
2020, or three times the contraction of 2009 after the global
financial crisis.
Under the best of circumstances, it will be a long road for
the U.S. economy to recover, with additional job losses likely
through June, Federal Reserve Chairman Jerome Powell said in an
interview on Sunday. MSCI's gauge of stocks around the globe .MIWD00000PUS
gained 2.90%, its biggest single-day percentage gain since April
6 when it jumped 5.5% after signs the death toll from the
coronavirus was slowing in Europe.
The pan-European STOXX 600 index .STOXX closed up 4.1%,
its biggest one-day percentage gain since March 24.
Germany's auto-heavy DAX index .GDAXI surged 5.7% to its
highest level in more than two weeks, while France's main CAC 40
index .FCHI rose 5.2%. The two countries called for the
creation of a European Recovery Fund worth 500 billion euros
($544 billion) to help the region quickly exit the crisis.

The deal, described by French President Emmanuel Macron as a
major step forward, seeks to break the impasse over joint euro
debt and act as a blueprint for a wider European Union
agreement. The euro rose on the news. On Wall Street the benchmark S&P 500 posted its biggest
one-day percentage gain in almost six weeks.
On Wall Street, the Dow Jones Industrial Average .DJI rose
911.95 points, or 3.85%, to 24,597.37. The S&P 500 .SPX gained
90.21 points, or 3.15%, to 2,953.91 and the Nasdaq Composite
.IXIC added 220.27 points, or 2.44%, to 9,234.83.
"The resilience of stock markets relative to the awful
economic data that we've been seeing over the past fortnight
speaks to an optimism that ... as economies come out of lockdown
we can expect to see improvements as we head into the second
half of the year," said Michael Hewson, chief market analyst at
CMC Markets.
Japan's preliminary GDP data showed that the world's third-
biggest economy contracted an annualized 3.4% in the first
quarter, slipping into recession for the first time in more than
five years. Hopes of a worldwide economic recovery lifted oil prices,
with prices settling 7%-8% higher, supported by output cuts.
"Optimism on the demand side of the oil equation has helped
prices climb further, with gasoline demand coming back as
governments ease confinement measures," said Rystad Energy
senior oil markets analyst Paola Rodriguez Masiu.
U.S. crude CLc1 added $2.39 to settle at $31.82 a barrel,
while Brent LCOc1 , the international benchmark, rose $2.31 to
settle at $34.81 a barrel.
The jump in oil prices lifted commodity currencies such as
the Norwegian crown and the Canadian dollar against the U.S.
dollar.
The dollar index =USD fell 0.771%, with the euro EUR= up
0.93% to $1.0916. The Japanese yen JPY= weakened 0.26% versus
the greenback at 107.33 per dollar.
Italian government bond yields fell to their lowest level in
over a month on the proposed Franco-German recovery fund.
Benchmark 10-year U.S. Treasury notes US10YT=RR fell 26/32
in price to push their yield up to 0.7224%.
Gold retreated from a more-than seven-year high as stocks
and oil surged. U.S. gold futures GCcv1 settled 1.3% lower at
$1,734.40 an ounce.
Gold traded sideways "because everybody is thinking
'risk-on,' get into equities - as markets across the board are
up 3%," said Michael Matousek, head trader at U.S. Global
Investors. But the trend "is still to the upside, there's still
plenty of reason to buy gold."

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