By Caitlin Ostroff and Joanne Chiu 

Global stocks rose Tuesday on optimism about economies reopening and the potential development of a coronavirus vaccine.

Futures linked to the S&P 500 advanced 1.9%, suggesting U.S. stocks could gain when they resume trading Tuesday after the long weekend. The pan-continental Stoxx Europe 600 advanced 0.9%, led by gains in bank shares and the travel and leisure sector.

Investors were cheering signs of economic activity resuming faster than some people had expected across parts of the U.S. and elsewhere in the world. Restaurant bookings and spending on hotels and airlines appears to be picking up in the U.S., and coincide with a decline in the daily number of new infections. The U.K. has laid out plans to reopen retail stores next month, while Italy, one of the hardest-hit countries, saw people return to bars and restaurants over the weekend.

"The market will drift higher from here, but it will be more of a grind as we tiptoe to normality," said Hani Redha, a multiasset portfolio manager at PineBridge Investments. A second wave of infections would be "the litmus test of this rally. What happens when we go back and how does the infection rate respond?"

Investors are also betting that one of at least 10 coronavirus vaccines under development will eventually come to market, halting the spread of the coronavirus and allowing normal business and social activity to resume. On Monday, Novavax Inc. said it started the first human study of its experimental vaccine. Drugmakers including Pfizer Inc. and Moderna Inc. are also racing to develop a vaccine. In premarket trading, shares of Novavax gained 16%.

"It looks like we have several shots on goal," said Mr. Redha. While manufacturing a vaccine and disseminating it to the wider population will take time, the number of potential candidates has buoyed markets, he said. "Any kind of glimmer of hope about any trial going well or any trial starting is going to be good."

In currency markets, China's central bank fixed its daily reference rate for yuan trading at 7.1293 to the dollar, the weakest level since February 2008. The onshore yuan is allowed to trade in a band around this fix, which the People's Bank of China sets based partly on previous market prices. The WSJ Dollar Index, which measures the greenback against a basket of currencies, declined 0.8%.

Global oil prices rose. West Texas Intermediate, the main U.S. crude gauge, advanced 2.9% to $34.20 a barrel. Brent crude, the global oil benchmark, advanced 2% to $36.84 a barrel.

Most major Asia-Pacific equity benchmarks ended the day higher. In Japan, where the government lifted its state of emergency Monday, the Nikkei 225 rose 2.6%.

Australia's benchmark index rose 2.9%, while Hong Kong's Hang Seng Index advanced 1.9%. The Shanghai Composite gained 1%.

Markets are underpinned by early signs that global economic activity is slowly improving, said Louis Lau, a California-based director of investments at Brandes Investment Partners. Mobility data, such as traffic volumes, is encouraging and might point to a gradual recovery, he said.

"People have been locked up for a few months, so I think they are eager to resume their normal lives," Mr. Lau said. "The recovery will be in fits and starts, and it may be a little jumpy," with some states that are quicker to reopen potentially risking a second wave of outbreaks, he said.

Reversing lockdowns could take longer than implementing them, according to Bhaskar Laxminarayan, chief investment officer for Asia at Bank Julius Baer. "The reopening will be a much more laborious process," he said.

The pace of recovery is likely to vary country by country, with governments in some developing nations unable to spend heavily to support their economies. Mr. Laxminarayan said. Lasting shifts in behavior and spending patterns could affect travel and retail, with potential economic consequences, he said.

Data on U.S. consumer confidence, due at 10 a.m. ET, will give investors an indication of how American households view the U.S. economy. Figures for May are expected to weaken with unemployment levels soaring and economic prospects still dim. Investors will also look to data released at the same time on new home sales in April to assess the state of the housing market.

In the bond market, the yield on 10-year Treasurys ticked up to 0.690%, from 0.659% Friday. Bond yields in northern European countries rose while yields fell in southern nations, including Italy and Greece. Yields and prices move inversely.

Markets have started to price in the passing of a Europe-wide recovery fund proposed by France and Germany, said James Athey, senior investment manager at Aberdeen Standard Investments. The spread, or difference, between German and Italian yields are at their smallest since April 9.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Joanne Chiu at joanne.chiu@wsj.com

 

(END) Dow Jones Newswires

May 26, 2020 08:48 ET (12:48 GMT)

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