GLOBAL MARKETS-Stocks grind higher on recovery hopes

* European shares add to best gains in nearly a month
* Nikkei eases after rally, S&P 500 futures rise
* Mood restrained by surge in virus cases, China/India spat
* Recovery hopes supported by jump in US retail sales
* Virus treatment drug trial also helps

By Marc Jones and Wayne Cole
LONDON/SYDNEY, June 17 (Reuters) - Europe's shares added to
their best gains in almost a month as safety plays lost their
lustre on Wednesday, with hopes of a rapid economic recovery
standing firm against a resurgence of global coronavirus cases.
Data showed U.S. retail sales bounced back sharply in May,
but new infections have hit record highs in six U.S. states and
China cut flights and closed schools to contain a fresh outbreak
in Beijing. The theme of a strong global economic rebound "will need to
be balanced against the 2nd wave COVID risks which are more
difficult to assess, and we would argue investors have assumed
to be perhaps more modest than in reality," said MUFG's Head of
Research Derek Halpenny.
Politics also lurked as a worry with India reporting 20 of
its soldiers had been killed in clashes with Chinese troops at a
disputed border site, while North Korea rejected a South Korean
offer to send special envoys and said it would redeploy troops
at the border. That was enough to inject a tinge of caution into trading.
Japan's Nikkei .N225 eased 0.5%, after jumping almost 5%
on Tuesday for its biggest daily gain in three months.
Europe's STOXX 600 saw its early 1% gains pruned nearly half
EU. but all the main indexes were firmly in positive
territory, and U.S. S&P 500 futures ESc1 pushed up having
spent most of the Asian session wavering either side of flat.
.N
Trial results announced on Tuesday showed dexamethasone,
used to reduce inflammation in other diseases such as arthritis,
reduced death rates by around a third among the most severely
ill COVID-19 patients admitted to hospital. "It is one of the best pieces of news we've had through this
whole crisis," Britain's Health Secretary Matt Hancock said.
MSCI's broadest index of World shares .MIWD00000PUS
crawled 0.2% higher, having climbed 2.2% the previous day to
reclaim a good portion of the ground it lost last week.
Chinese blue chips .CSI300 recovered from an early dip to
finish steady. That followed a robust session on Wall Street
overnight. The Dow .DJI ended Tuesday up 2.04%, while the S&P
500 .SPX gained 1.90% and the Nasdaq .IXIC 1.75%.
Hopes for recovery had been bolstered by the data showing
U.S. retail sales data jumped by a record 17.7% in May,
recovering more than half the losses of the previous two months,
though industrial output still lagged. The Trump administration was also reportedly preparing an
up-to $1 trillion infrastructure package, something that was
initially promised more than three years ago. THE WORST
"There is little doubt that the global economy bottomed in
April and is poised to post record-high growth rates over May
and June, strongly lifting 3Q GDP above its 2Q trough," wrote
economists at JPMorgan.
"But questions about the extent of lasting damage will have
to wait for a number of months before being resolved."
Federal Reserve Chair Jerome Powell cautioned that output
and employment would remain well short of their pre-pandemic
levels for a long time, so there was a "reasonable probability"
that more policy support would be needed. All the talk of recovery caused headwinds for sovereign
bonds, though U.S. Treasuries did recoup some of the losses
posted in Asia.
Thirty-year yields US30YT=RR were up 2 basis points at
1.55%, having risen by the most in a month on Tuesday, and
10-year German Bunds led a flurry of similar rises in Europe
ahead of a 5 billion euro bond sale. GVD/EUR
"The tension between better economic data and rising
COVID-19 cases continues to drive market volatility," said
Antoine Bouvet, senior rates strategist at ING in London.
The dollar bounced modestly from recent three-month lows to
stand at 96.978 against a basket of currencies =USD .
The dollar was up a touch on the Japanese yen at 107.40
JPY= , while the euro stood at $1.1268 EUR= from its recent
top of $1.1422.
In commodity markets, gold was stuck at $1,725 XAU= and
well within the $1,670/$1,764 range of the past few weeks.
Gains in oil prices slowed amid an increase in U.S. crude
inventories. They had climbed 3% on Tuesday after the
International Energy Agency (IEA) raised its oil demand forecast
for 2020. O/R
Brent crude futures LCOc1 swung 1% higher to $41.35 a
barrel, while U.S. crude CLc1 ticked up 16 cents to $38.54.

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