German sentiment survey boosts stocks, Europe focuses on recovery fund

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 22, 2020. REUTERS/Staff

LONDON (Reuters) – Stocks gained modestly on Monday with many countries on holiday as German business morale rebounded strongly in May, offering a glimpse of optimism to battered investors of what lay beyond weeks of economic lockdowns.

MSCI’s gauge of world stocks gained 0.4%, nearing a 2-1/2 month high. The pan-European STOXX 600 index was up 1.2%.

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 and Spain. Prime Minister Shinzo Abe lifted the state of emergency for Tokyo and four remaining areas on Monday while the government is also considering fresh stimulus worth 100 trillion yen ($930 billion).

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