GLOBAL MARKETS-Stocks, dollar gain on U.S. retail sales, drug trial

(Adds byline, dateline; previous LONDON)
* Equities rally as stimulus soothes second wave worries
* U.S. retail sales see record rebound
* Fed announces start of corporate bond buying program
* Bank of Japan increases support for cash-strapped firms
* Treasury and Bund yields edge higher
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones
NEW YORK/LONDON, June 16 (Reuters) - A record rebound in
U.S. retail sales, fresh support from the Federal Reserve and
Bank of Japan, and upbeat trial results for a COVID-19 treatment
boosted risk appetite on Tuesday, driving equity markets higher
and strengthening the dollar.
U.S. Treasury yields rose and demand for lower-rated
southern European debt increased on the upbeat sentiment, even
as a fresh coronavirus outbreak in China helped gold edge higher
in see-saw trade.
A near 5% jump overnight by Japan's Nikkei .N225 gave Asia
.MIAP00000PUS its best day since late March, while the major
European bourses rallied at least 3%. The three main equity
gauges for Wall Street rose 2% or more, as did emerging markets.
U.S. retail sales jumped the most on record in May, offering
new evidence the recession triggered by the coronavirus pandemic
was drawing to an end, while trial results showed dexamethasone
reduced death rates by about one-third among the most severely
ill COVID-19 patients. A report overnight said the Trump administration was
preparing a nearly $1 trillion infrastructure proposal, the
government stimulus, after the Federal Reserve on Monday said it
would start buying corporate bonds to infuse liquidity.
"It looks like we bounced back nicely in May for retail
sales, which is good news. The drug results are very good news
and then the spending package is good news," Patrick Leary,
chief market strategist at debt underwriter Incapital.
"All this stuff is bullish for stocks, bullish for corporate
bonds," Leary said. Congress has the ability to support the
economy through their spending powers, the Fed is doing what it
can through its lending powers."
Fed Chair Jerome Powell told U.S. lawmakers as he began the
first of two days of testimony that a full U.S. economic
recovery will not occur until the American people are sure that
the coronavirus epidemic has been brought under control.
MSCI's gauge of stocks across the globe .MIWD00000PUS
gained 2.55%, while the pan-regional FTSEurofirst 300 index
.FTEU3 closed up 2.90%.
Emerging market stocks rose 2.58% and Wall Street gained.
The Dow Jones Industrial Average .DJI rose 643.83 points,
or 2.5%, to 26,406.99. The S&P 500 .SPX gained 69.85 points,
or 2.28%, to 3,136.44 and the Nasdaq Composite .IXIC added
194.73 points, or 2%, to 9,920.75.
News elsewhere contributed to the bullish sentiment.
Germany's monthly ZEW investor sentiment survey showed
investors are confident that Europe's largest economy will be
over the worst of the coronavirus impact by the end of the
European summer. The dollar was mostly stronger, with the euro EUR= down
0.47% to $1.1269 and the Japanese yen JPY= up 0.01% at 107.32.
Britain's pound GBP/ rose on a mix of better-than-feared
unemployment numbers and friendlier Brexit talks.
The Bank of Japan increased its lending packages for
cash-strapped firms to $1 trillion from about $700 billion, but
also kept rates steady, sticking to its view that the Japanese
economy will gradually recover from the pandemic. U.S. 10-year Treasury notes US10YT=RR rose 4.9
basis points to yield 0.7578%.
German, French, Dutch and other core yields rose in Europe
too. Riskier Italian yields fell to their lowest since the end
of March and the iTraxx European crossover index, which reflects
the cost of insuring against junk-rated corporate bond defaults,
fell to its lowest in six days ITEX05Y=MG . GVD/EUR
"In the absence of a further surge in new (coronavirus)
infections in China or the U.S., the market hopes about monetary
and fiscal tailwinds alongside improving sentiment indicators
should prevail," Commerzbank strategists wrote.
Oil prices rose as equity markets surged and the
International Energy Agency (IEA) increased its oil demand
forecast for 2020, but gains were capped by worries about a
second wave of coronavirus cases.
U.S. crude CLc1 recently rose 0.86% to $37.44 per barrel
and Brent LCOc1 was at $40.26, up 1.36% on the day.
A whopping 98% of investors surveyed by BOFA believe markets
are "overvalued" after world stocks roared back from March lows.
But those fears haven't stopped many from joining the rally.
The survey showed hedge fund net equity exposure jumping to
52% from 34%, the highest since September 2018. U.S. tech and
growth stocks remained the "most crowded trade" for a second
straight month. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Global assets http://tmsnrt.rs/2jvdmXl
Global currencies vs. dollar http://tmsnrt.rs/2egbfVh
Emerging markets http://tmsnrt.rs/2ihRugV
MSCI All Country Wolrd Index Market Cap http://tmsnrt.rs/2EmTD6j
S&P 500 market cap, daily moves https://tmsnrt.rs/2YCDodm
Asset performance vs outbreak https://tmsnrt.rs/2YF3T1T
Stocks and oil versus COVID-19 cases https://tmsnrt.rs/3cXWNdO
Asia stock markets https://tmsnrt.rs/2zpUAr4
Global markets on the recovery run https://tmsnrt.rs/2UNKMS4
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