Asian stocks are at six-week highs

Asian stock markets rose to six-week highs on Monday on signs that the global economic recovery remains on track. However, increasing COVID-19 cases in the region weighed on sentiment for investors.

Futures for the Euro Stoxx 50 were flat, as were those for the German DAX. 

The mood was relatively positive in Asia, where the MSCI Asia Pacific Stock Index excluding Japan peaked since March 18, despite late-session sales in Chinese stocks.

Fears that rising COVID-19 cases in India will reduce demand for fuel at the world’s third-largest oil importer pressed oil prices on Monday, which fell about 1% last week.

China’s CSI 300 Index dropped by 0.7% after reaching its highest level since April 6 early in the session. Australia’s benchmark equity index was down 0.2% on holiday in five of the country’s eight states and territories.

South Korea’s KOSPI stock index climbed by 0.7%, while New Zealand shares added 0.6%. The Japanese Nikkei reversed early losses for the day to expand by 0.4%.

So far, risk assets like equities have performed well, with the MSCI ex-Japan index on track for a third consecutive year of positive returns. Since April 2020, the index has delivered positive returns in all but three months.

Economic data suggests a substantial recovery

Recent data indicating a solid global economic recovery has bolstered confidence in risk assets.

Manufacturing activity indicators for early April, released last week, pointed to a solid start to the second quarter. The data hit all-time highs in the United States and signaled the end of the double recession in Europe.

According to analysts, first-quarter US GDP data will show that activity has likely returned to pre-pandemic levels to be released this week.

ANZ economists estimate that the economy will close the output gap and rise above its potential in the second half of this year.

Some economists say the market could hit a slump in the coming months due to concerns ranging from rising COVID-19 cases. Besides, there are concerns that most of the benefits from massive public fiscal stimulus have already been reduced.

JPMorgan analysts wrote that this might be the last quarter in which companies can avoid being penalized for not seeing revenue recover quickly.

Robust recent macroeconomic data prompted bond sales, although 10-year Treasury yields were not far from their recent six-week low. The US Federal Reserve is forecast to continue to pursue accommodative monetary policy.