Europe stocks edge higher, as US futures dip, oil rises

Bloomberg

European stocks edged higher, US equity futures slipped and Asian shares dropped on Tuesday as investors weighed an up-tick in coronavirus infections in several nations and signs of fresh trade tension. Oil rose.
The Stoxx 600 Index nudged upward after a downbeat start as gains for healthcare shares offset declines for the financial and energy sectors. S&P 500 futures retreated after the Trump administration moved on Monday night to block investments in Chinese equities by a government retirement fund. Stocks in Hong Kong and India led the retreat across Asia. Most European bonds slipped and Treasuries drifted higher.
Global equities have recouped about half of their plunge after hitting a March low, but the sustainability of the rally remains in question amid poor economic data and company earnings and as countries begin to unwind lockdowns that froze economic activity. Goldman Sachs Group Inc. warned that investors got ahead of themselves and the S&P 500 Index could drop almost 20% in the next three months.
“The increased risk from US/China trade relations and the data from countries at the leading edge of the virus spread are a real fly in the ointment for investors hungrily eying a rapid return to economic normality to justify their long risk exposure,” said James Athey, investment director at Aberdeen Standard.
Wuhan, where the pandemic began, reported its first new infections since the Chinese city ended its lockdown last month. South Korea reported a flare-up in virus cases. Russia had a record number of new cases in one day. Germany recorded the first increase in new coronavirus infections in four days as it gradually relaxes restrictions.
Futures on the S&P 500 Index decreased 0.2% as of 9:28 am London time and the Stoxx Europe 600 Index rose 0.2%. The MSCI Asia Pacific Index fell 0.7%.
While the Bloomberg Dollar Spot Index climbed 0.1%, the euro increased 0.1% to $1.0823 and the British pound was unchanged at $1.2335. The Japanese yen strengthened 0.2% to 107.49 per dollar.
While the yield on 10-year Treasuries decreased one basis point to 0.70%, Germany’s 10-year yield increased two basis points to -0.49% and Britain’s 10-year yield rose one basis point to 0.274%.

China Brokers Raise Record Short-Term Debt in Leverage Spree
Meanwhile, Chinese securities firms are raising a record amount in short-term bills, taking advantage of cheap, central bank-fuelled liquidity as they pile into the nation’s battered stocks ahead of the industry’s opening to more competition from Wall Street.
Seizing on a market plunge as the nation grappled with the outbreak of the coronavirus, China’s brokers issued $44 billion of short-term bills in the interbank market in the first four months of the year, according to data compiled by Bloomberg. CITIC Securities Co. and China Merchants Securities Co. were the two biggest issuers, raising 38 billion and 33 billion yuan, respectively.
“Most brokers are tapping into the short-term funding to boost investments in proprietary trading or re-lend to clients in margin lending,” said Zhang Jingwei, an analyst at Essence Securities Co. “The stock market is at a relatively low point and brokers are more motivated to enhance capital at the moment to buy low.”
China’s over 130 brokers eked out just half the return of Wall Street rivals last year. They are now seeking to expand their traditional business of serving mom and pop traders by building out a broader menu of investment banking services that require more capital, such as market making and margin financing.