ASX to open higher, $A steady

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Australian shares are poised to open higher as sentiment about the outlook continues to improve.

ASX futures were up 47 points or 0.8% to 5673 near 7.15am AEST. The local currency edged up 0.1%.

Sharemarkets were closed in the UK and the US for public holidays.

Elsewhere, European shares rose in thin trade as a closely watched indicator of German business sentiment rebounded in May, with a slew of positive corporate updates boosting sentiment.

Also bolstering sentiment was confirmation of a $15 billion rescue of Lufthansa. The carrier has been locked in talks with Berlin for weeks over aid it needs to survive an expected protracted travel slump, with the airline wrangling over how much control to yield in return for financial support.

Germany's DAX surged 2.9% to its highest level since March 6, recovering nearly 38% from this year's low.

The euro zone stock index rose 2.1%, while the pan-European STOXX 600 gained 1.5%.

A survey by the Ifo Institute showed German business morale rebounded in May after a dramatic fall the previous month, with activity gradually returning to normal after weeks of coronavirus-induced curbs.

The Ifo business climate index rose to a better-than-expected 79.5 from a downwardly revised 74.2 in April.

Today's agenda

Local data: PM Scott Morrison to speak at the National Press Club at 12.30pm AEST. NZ April trade balance

Overseas data: German GfK consumer confidence June; US Chicago Fed national activity index April, FHFA house prices March; Conference Board consumer confidence May, New home sales April, Dallas Fed index May

Market highlights

ASX futures up 47 points or 0.8% to 5673 near 7.15am AEST

From today's Financial Review

Directors get six-month reprieve on disclosure: Companies providing profit guidance will be relieved from continuous disclosure rules for the next six months, because of the economic uncertainty fuelled by the coronavirus.

Time to take economy out of intensive care: PM: Scott Morrison will appeal to a "new sense of common purpose", with $1.5 billion in federal funding to the states as leverage, to deliver an economic recovery he envisages will take between three and five years.

Bain's Mike Murphy must dive deeper at Virgin: Bain Capital has pushed its local boss Mike Murphy into the spotlight as it fights for Virgin. It's a position that's familiar to the former Olympic diver.

United States

US markets were closed for the Memorial Day holiday.

The Bank of Canada’s policy framework is flexible enough to allow the inflation rate to climb back up to the bank’s 2% target more slowly than on average, governor Stephen Poloz said on Monday.

The comments by Poloz, whose successor Tiff Macklem takes over on June 3, marked the second time in less than a week that he has made clear current record low interest rates were unlikely to increase any time soon.

Yardeni Research outlook for the S&P 500: "...the remarkable rally in the S&P 500 since March 23 could stall around 2900 over the rest of the year, with lots of volatility if there is a second wave of the pandemic".

Yardeni argues that "investors may need to be cautious if the general public isn’t cautious enough about the virus, which remains both asymptomatic and highly infectious.

"It will probably require a vaccine for the stock market to move back into record territory on the way to our year-end 2021 target of 3500, notwithstanding the flood of liquidity we discuss below. We remain optimistic about the future but are turning more cautious about the present".

Europe

Germany threw Lufthansa a €9 billion lifeline on Monday, agreeing a bailout which gives Berlin a veto in the event of a hostile bid for the airline. Lufthansa surged 7.5%.

The largest German corporate rescue since the coronavirus crisis struck will see the government get a 20% stake, which could rise to 25% plus one share in the event of a takeover attempt, as it seeks to protect thousands of jobs.

Travel group TUI AG jumped 15.3% on plans to resume flights to main holiday destinations in Europe by the end of next month.

France's Airbus gained 8.5%, while the broader travel & leisure index was up 1.2%.

Italy's Intesa Sanpaolo may have to delay launching a takeover bid for rival UBI until September as antitrust approval for the biggest European banking merger in a decade is taking longer than expected, three people close to the matter said on Monday.

Intesa unveiled on February 17 an all-paper exchange offer for UBI to create the euro zone's seventh-largest banking group, and had expected to launch the bid at the end of June, soon after receiving regulatory clearance.

Asia

Hong Kong stocks reversed early losses to end higher on Monday, helped by gains in tech and consumer firms, in anticipation of further stimulus measures from Beijing to boost domestic consumption and seek tech self-sufficiency.

At the close of trade, the Hang Seng index was up 22.10 points or 0.1% at 22,952.24. The Hang Seng China Enterprises index ended 0.4% firmer at 9465.94.

Japanese stocks advanced on Monday as the government looked set to end the state of emergency in Tokyo and surrounding areas, raising hopes that the world's third-largest economy may soon start recovering from recession.

The benchmark Nikkei average rose 1.7% to 20,741.65, its best finish since March 6, with air and land transport shares leading the rally.

Currencies

Italian bond yields shrugged off a paper from hawkish European Union states opposing a Franco-German proposal for a grants-based coronavirus recovery fund, dropping to six-week lows on Monday.

Austria, Sweden, Denmark and the Netherlands outlined on Saturday their previously voiced opposition to the proposed €500 billion fund, which would issue grants to the regions worst hit by the pandemic.

"We propose to create an Emergency Recovery Fund based on a 'loans for loans' approach," the four countries said. They said the fund should not lead to any mutualisation of debt.

The Franco-German proposal's inclusion of grants, rather than loans, boosted Italian bonds last week to their best performance in eight weeks.

EU grants would not count towards Italy's hefty debt pile, which investors have worried may become unsustainable should Rome be liable for its coronavirus stimulus spending in full.

The European Commission is due to release its recovery plan on Wednesday.

Despite the uncertainty around what the final package will look like, Italy's 10-year yield dropped as much as 3 basis points to a six-week low at 1.57%.

Yardeni's view on cash holdings among institutional investors: "The dash for cash may not be as mad as it was in March, yet liquid assets rose to yet another record high of $US16.2 trillion during the May 11 week, up a whopping $US2.4 trillion since the end of February.

"Over this same period, savings deposits (including money market deposit accounts) jumped $US1.2 trillion, while retail and institutional money market mutual fund (MMMF) assets increased $US184 billion and $US1.1 trillion, respectively."

Yardeni's tally on central bank moves: "The major central banks continue to pump liquidity into global financial markets by expanding their balance sheets. The Fed’s assets have soared to a record $US7.0 trillion during the May 20 week from $US4.3 trillion on March 15 when QE4 was announced, and expanded to QE4Ever the following week. The Fed’s holdings of US Treasury securities have increased by $US2.3 trillion since the start of the current fiscal year (last October), which is more than half of the way to funding all of this year’s projected $US3.7 trillion federal budget deficit.

"The balance sheets of the Fed, European Central Bank, and Bank of Japan collectively are up $US4.2 trillion since the end of February to $US18.7 trillion during the May 15 week."

Commodities

China's gold imports via Hong Kong in April fell short of its exports for the first time since at least 2011 as measures to contain the spread of coronavirus hammered demand in the top consumer of the metal.

Hong Kong Census and Statistics Department data on Monday showed it became a net importer of gold from China last month for the first time in Reuters data going back to January 2011, receiving 10.3 tonnes versus exports of 13.5 tonnes in March.

"China's gold price was trading at too big a discount compared to the overseas price, so gold imports fell a lot because supply inside the country is abundant already," Samson Li, a Hong Kong-based precious metals analyst at Refinitiv GFMS, said.

Dealers in top consumer China sold gold at discounts of up to $US70 an ounce versus benchmark spot prices last month, the most on record according to data going back to 2014.

"At the same time, gold flowed out from mainland China to Hong Kong, thus it turned from net imports to net exports in April, the first time since 2011," Li said.

Exports to Hong Kong stood at 14.513 tonnes, compared with 0.685 tonnes reported for March.

China's total gold imports via Hong Kong plunged more than 70% to 4.213 tonnes from 14.208 tonnes in March.

Australian sharemarket

The Australian sharemarket closed at an 11-week high on Monday as local shares extended their rebound from March's market rout with the economy slowly returning to normal.

The S&P/ASX 200 Index ended the first session of the week 118.6 points, or 2.2 per cent, higher at 5615.6, its best close since March 11.

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