GLOBAL MARKETS-Stocks buoyant, dollar slips as economies start to unlock

* European stocks kick off June with strong gains
* USD hits 11-week low against major currencies
* U.S. stock futures under pressure, down 0.2%
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
* China surveys show growth at home, subdued exports

By Thyagaraju Adinarayan
LONDON, June 1 (Reuters) - World stocks hovered near
three-month highs and the dollar was flat on Monday as optimism
over economies opening up again boosted risk appetite, despite
worries over riots in the United States and unease over
Washington's standoff with Beijing.
Having risen a whopping 35% from a late March trough, stocks
looked set to kick off June with more gains. The MSCI world
stocks index .MIWD00000PUS has recovered two-thirds of the
losses it incurred in the aftermath of the coronavirus outbreak.
Investors were also relieved that President Donald Trump
left a trade deal with China intact despite moving to end
Washington's special treatment for Hong Kong in retaliation for
Beijing seeking to impose new security legislation on the city.
China has asked state-owned firms to halt purchases of
soybeans and pork from the United States, two people familiar
with the matter said, following Washington's move over Hong
Kong. In Europe, stock markets .STOXX were up 0.8% led by
virus-hit sectors such as travel & leisure, banks and miners but
volumes were subdued as Germany, Switzerland and Austria were
closed for holidays.
"The Trump rhetoric against China and trade impediments
against Hong Kong could have been a lot worse, hence the
performance of those markets this morning, which has helped the
risk backdrop for the European open," said Chris Bailey,
European strategist at wealth manager Raymond James.
In Asia, stocks closed higher, led by China on signs that
parts of the domestic economy were picking up. Hong Kong .HSI
managed to rally 3.4%, while Chinese blue chips .CSI300 put on
2.7%.
An official business survey from China showed its factory
activity grew at a slower pace in May but momentum in the
services and construction sectors quickened.
Japan's Nikkei .N225 added 0.8% to also reach a
three-month peak.
E-Mini futures for the S&P 500 ESc1 however were trading
0.2% lower on simmering U.S.-China tensions.
The safe-haven dollar .DXY , meanwhile, hit an 11-week low
dented by risk-on mood among investors and riots in major U.S.
cities over race and policing. "I agree the riots are not good but the perception is that
this is a local issue...and the uncertainty has spilled over
into a lower dollar," Bailey added.
The turmoil in the U.S. was a fresh setback for the economy
which was only just emerging from a downturn akin to the Great
Depression. Following poor data on spending and trade out on
Friday, the Atlanta Federal Reserve estimated economic output
could drop a staggering 51% annualised in the second quarter.
The May jobs report due out on Friday is forecast to show
the unemployment rate surged to 19.8%, smashing April's record
14.7%. Payrolls are expected to drop by 7.4 million, on top of
the 20.5 million jobs lost the previous month.
YEARS, NOT MONTHS
"Current unemployment numbers go far beyond what has been
experienced in any post-war recession," Barclays economist
Christian Keller wrote in a note. "To the extent that some
sectors may never return to pre-pandemic business-as-usual."
Bond investors suspect economies will need massive amounts
of central bank support long after they reopen and that is
keeping yields super low even as governments borrow much more.
Yields on U.S. 10-year notes US10YT=RR were trading steady
at 0.66% having recovered from a blip up to 0.74% last month
when the market absorbed a tidal wave of new issuance.
German bund yields DE10YT=RR were stuck near minus 0.42%.
In currency markets, the euro was last up at $1.1114 EUR= ,
after climbing 1.8% last week. The Australian dollar AUD=D3
hit a four-month high.
Much of the dollar's recent decline has come against the
euro which has been boosted by plans for an EU stimulus package.
The European Central Bank is also widely expected to say on
Thursday that it will raise its asset buying by around 500
billion euros to 1.25 trillion.
In commodity markets, gold added 0.5% to $1,735 an ounce
XAU= . GOL/
Brent crude LCOc1 futures were off 8 cents at $37.76 a
barrel, while U.S. crude CLc1 fell 35 cents to $35.14. O/R

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