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Optimism About Coronavirus Vaccine May Generate Early Buying Interest

The major U.S. index futures are currently pointing to a higher opening on Monday, with stocks likely to add to the gains posted in the two previous sessions.

The upward momentum on Wall Street partly reflects optimism about a coronavirus vaccine after Moderna's (MRNA) early-stage human trial for a vaccine produced antibodies in all 45 participants.

Stocks saw considerable volatility during trading on Friday after coming under pressure early in the session. The major averages bounced back and forth across the unchanged line before eventually closing in positive territory.

After slumping by more than 270 points in early trading, the Dow rose 60.08 points or 0.3 percent to 23,685.42. The Nasdaq advanced 70.84 points or 0.8 percent to 9,014.56 and the S&P 500 climbed 11.20 points or 0.4 percent to 2,863.70.

Despite turning positive for two straight sessions, the Dow posted notable losses for the week. The Dow plunged by 2.7 percent, the S&P 500 tumbled by 2.3 percent and the Nasdaq slumped by 1.2 percent.

The higher close on Wall Street came as traders shrugged off the release of some dismal U.S. economic data, including reports showing record decreases in retail sales and industrial production in the month of April.

The Commerce Department said retail sales cratered by 16.4 percent in April after tumbling by a revised 8.3 percent in March.

Economists had expected retail sales to plummet by 12.0 percent compared to the 8.7 percent slump originally reported for the previous month.

Excluding sales by motor vehicle and parts dealers, retail sales plunged by an even steeper 17.2 percent in April after falling by a revised 4.0 percent in March.

Ex-auto sales were expected to tumble by 8.6 percent compared to the 4.5 percent nosedive originally reported for the previous month.

A separate report from the Federal Reserve showed industrial production plummeted by 11.2 percent in April after tumbling by a revised 4.5 percent in March.

Economists had expected production to plunge by 11.5 percent compared to the 5.4 percent nosedive originally reported for the previous month.

Concerns about the economy may have been offset by a report from the University of Michigan showing an unexpected improvement in consumer sentiment in the month of May.

The report said the consumer sentiment index rose to 73.7 in May after plummeting to 71.8 in April. The rebound surprised economists, who had expected the index to slip to 68.0.

Another report released by the New York Federal Reserve showed regional manufacturing activity continued to deteriorate significantly in the month of May, although the pace of contraction slowed considerably from the previous month.

The New York Fed said its general business conditions index jumped nearly thirty points to a negative 48.5 in May from a negative 78.2 in April.

While a negative reading indicates a continued contraction in regional manufacturing activity, the index came in well above economist estimates for a reading of negative 63.5.

Gold stocks moved sharply higher over the course of the session, driving the NYSE Arca Gold Bugs Index up by 4.1 percent to its best closing level in seven years.

The rally by gold stocks came amid a continued increase by the price of the precious metal, with gold for June delivery jumping $15.40 to $1,756.30 an ounce.

Significant strength also emerged among biotechnology stocks, as reflected by the 2.7 percent spike by the NYSE Arca Biotechnology Index.

Software, natural gas, tobacco and retail stocks also saw considerable strength, contributing to the higher close by the broader markets.

On the other hand, semiconductor stocks showed a substantial move to the downside, dragging the Philadelphia Semiconductor Index down by 2.2 percent.

The weakness in the sector came after the Trump administration moved to block shipments of semiconductors to Chinese telecom giant Huawei Technologies.

Banking, utilities and transportation stocks also saw notable weakness, partly offsetting the strength seen in the aforementioned sectors.

Commodity, Currency Markets

Crude oil futures are soaring $2.79 to $32.22 a barrel after spiking $1.87 to $29.43 a barrel last Friday. Meanwhile, after jumping $15.40 to $1,756.30 an ounce in the previous session, gold futures are slipping $2.90 to $1,753.40 an ounce.

On the currency front, the U.S. dollar is trading at 107.38 yen versus the 107.06 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.0843 compared to Friday's $1.0820.

Asia

Asian stocks rose on Monday as higher commodity prices and optimism about a gradual reopening of businesses around the world helped investors shrug off fears of a renewed trade row between the United States and China.

Chinese shares posted modest gains after data showed home prices rose in April, helping offset renewed trade tensions between Beijing and Washington.

The benchmark Shanghai Composite index inched up 6.96 points, or 0.24 percent, to 2,875.42, while Hong Kong's Hang Seng index rose 0.58 percent to 23,934.77.

Japanese shares gained ground after data showed coronavirus infections slowed in the country.

Osaka Prefecture on May 17 reported no new novel coronavirus infections for the first time since March 9, while two other special alert prefectures Chiba and Kyoto also reported no new cases.

The daily number of new cases in Tokyo dropped to five on Sunday, the lowest since the capital was placed under a state of emergency on April 7, raising optimism that the government would soon ease restrictions.

The Nikkei average gained 96.26 points, or 0.48 percent, to 20,133.73, while the broader Topix index closed 0.38 percent higher at 1,459.29.

Heavyweight SoftBank Group rose over 1 percent after its board approved a second 500 billion-yen tranche of share purchases and the company said that Alibaba co-founder Jack Ma will resign from its board.

Sumitomo Mitsui Financial Group jumped 3.5 percent after its annual
net profit overtook that of rivals Mitsubishi UFJ Financial Group and Mizuho Financial Group for the first time.

Chipmaking-related stocks succumbed to selling pressure after the Philadelphia semiconductor index lost 2.2 percent on Friday amid increasing tensions between the United States and China, the world's two-largest economies.

Advantest plunged 4.3 percent, Tokyo Electron tumbled 3.7 percent and Screen Holdings lost as much as 13.7 percent.

Investors shrugged off data showing that the Japanese economy slipped into a recession in the first quarter.

The Cabinet Office said in a preliminary report that Japan's gross domestic product shrank a seasonally adjusted 0.9 percent sequentially in the first quarter of 2020.

That exceeded expectations for a 1.2 percent drop following the 1.8 percent decline in the previous three months.

On an annualized basis, GDP was down 3.4 percent - but that again beat forecasts for a fall of 4.6 percent following the downwardly revised 7.3 percent contraction in the three months prior (originally -7.1 percent).

Australian markets rose sharply as the government implements a three-step plan to gradually remove baseline restrictions and make the country Covid-safe.

The benchmark S&P/ASX 200 index climbed 55.70 points, or 1.03 percent, to 5,460.50, while the broader All Ordinaries index ended up 64.70 points, or 1.18 percent, at 5,557.50.

Gold miners Northern Star Resources, Evolution Mining and Newcrest rallied 4-7 percent after gold prices extended gains to a fourth session on Friday on renewed Sino-U.S. tensions.

Miners BHP, Fortescue Metals Group and Rio Tinto jumped 5-6 percent after China iron ore futures scaled a 9-1/2-month peak on Friday

Energy companies such as Beach Energy, Oil Search and Santos gained 4-6 percent, while in the healthcare sector, CSL advanced 1.5 percent Ramsay Health Care surged 3.1 percent.

National Australia Bank fell 1.9 percent. The lender said its customer support team will start check-ins with customers on about 80,000 home loans who have received a repayment pause to help them through the impact of Covid-19.

Elders soared almost 10 percent after the agribusiness and property group reported a half-year net profit that surged from last year, helped by its acquisition of wholesaler Australian Independent Rural Retailers.

Seoul stocks closed higher aided by hopes of global stimulus measures. The benchmark Kospi rose by 9.83 points, or 0.51 percent, to 1,937.11. Market heavyweight Samsung Electronics rallied 2 percent while consumer electronics giant LG Electronics gained 3.7 percent.

Europe

European stocks were moving higher on Monday amid hopes for an early economic recovery as Italy, New York and Spain moved to ease quarantine restrictions.

Rising oil prices and comments from Fed Chair Jerome Powell also helped underpin investor sentiment.

In remarks aired on CBS's "Face the Nation", Powell said the United States would have a slow recovery from what he called the "biggest shock that the economy's had in living memory.

The pan European Stoxx 600 jumped nearly 2 percent to 334.76 after gaining half a percent on Friday.

The German DAX rallied 2.7 percent, while France's CAC 40 index and the U.K.'s FTSE 100 were up around 2.1 percent.

Fiat Chrysler Automobiles shares jumped 4 percent. The company confirmed that it is in talks with the Italian government to obtain a state guarantee on a 6.3 billion euros loan facility.

Ryanair Holdings jumped more than 9 percent. The budget airline said it has
received a 600 million-pound ($726 million) loan backed by the U.K. government.

Easyjet climbed over 6 percent and British Airways parent IAG soared 6.8 percent.

Energy majors BP Plc and Royal Dutch Shell Plc surged around 4 percent, while mining giant Anglo American soared 6.2 percent, Antofagasta rallied 3.3 percent and Glencore advanced 5.1 percent.

AstraZeneca gained 1.7 percent. The company said it would make up to 30 million doses of the Oxford coronavirus vaccine by September if the vaccine is successful.

Gold mining company Centamin jumped 5 percent. The company maintained its 2020 production outlook after reporting a rise in FY19 underlying EBITDA.

Vodafone shares rose about 1 percent. The telecommunications firm has partnered with Oppo to bring a range of handsets made by the Chinese smartphone brand, including 5G-ready devices, to Vodafone's European markets starting from May.

Hotel company Accor advanced 2.4 percent after it secured a new banking credit facility and said it is seeing some "initial signs of business improvement."

Total SA surged 4 percent as it called off plans to acquire Occidental Petroleum Corp's assets in Ghana, and agreed to buy up assets from Energías de Portugal.

German conglomerate Thyssenkrupp added 5 percent on a Reuters report that it was in talks with international peers about consolidating its loss-making steel business.

U.S. Economic Reports

The National Association of Home Builders is scheduled to release its report on homebuilder confidence in the month of May at 10 am ET. The housing market index is expected to rise to 35 in May after plummeting to 30 in April.

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