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Asia shares make cautious gains, oil and gold jump – Reuters

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SYDNEY (Reuters) – Asian shares crept ahead on Monday and oil prices hit a five-week high as more countries re-opened their economies, stirring hopes the world was nearer to emerging from recession.

FILE PHOTO: Pedestrians wearing face masks walk near an overpass with an electronic board showing stock information, following an outbreak of the coronavirus disease (COVID-19), at Lujiazui financial district in Shanghai, China March 17, 2020. REUTERS/Aly Song/File Photo

Summer weather is enticing much of the world to emerge from coronavirus lockdowns as centres of the outbreak from New York to Italy and Spain gradually lift restrictions that have kept millions cooped up for months.

“The economies of Europe and the U.S. likely bottomed out in April and are slowly starting to come back to life,” wrote Barclays economist Christian Keller in a note.

“However, incoming data from most economies highlight the depth of the contraction, raising risks of longer-term scarring that might undermine the recovery.”

Federal Reserve Chairman Jerome Powell took a cautious line in an interview over the weekend saying a U.S. economic recovery may stretch deep into next year and a full comeback might depend on a coronavirus vaccine.

Late Sunday, Powell outlined the likely need for three to six more months of government financial help for firms and families.

Data out on Friday had shown retail sales and industrial production both plunged in April, putting the U.S. economy on track for its deepest contraction since the Great Depression.

Closer to home, data in Japan showed the world’s third-largest economy slipped into recession in the first quarter, putting it on course for its worst postwar slump as the coronavirus takes a heavy toll.

Adding to the uncertainty were the trade tensions between the United States and China, with Beijing warning it was opposed to the latest rules against Huawei.

All of which made for a guarded mood and MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS edged up 0.1% in early trade. Japan’s Nikkei .N225 rose 0.2% and South Korean stocks .KS11 0.1%.

E-Mini futures for the S&P 500 ESc1 added 0.7%, though results from a raft of U.S. retailers this week are likely to make grim reading.

Dealers reported much chatter about a possible treatment for COVID-19 from drug maker Sorrento Therapeutics (SRNE.O), which saw its shares soar on Friday.

Another focus will be the U.S. Treasury Department’s first auction for its 20-year bond on Wednesday. Treasury plans to borrow a record amount of nearly $3 trillion this quarter.

So far, the market has easily absorbed the flood of new debt, with 10-year yields US10YT=RR holding to a tight range around 0.64%.

The dollar has also been largely range-bound, with its safe-haven appeal keeping it well supported overall. Against a basket of currencies, it was last at 100.38 =USD, having drifted 0.7% higher last week.

The euro was steady at $1.0820 EUR=, while the dollar edged up 0.2% on the Japanese yen to 107.25 JPY=.

The pound touched a seven-week low at $1.2073 GBP= after the chief economist of the Bank of England said the bank was looking more urgently at options such as negative interest rates and buying riskier assets to prop up the economy.

In commodity markets, the flood of liquidity from central banks combined with record-low interest rates to help lift gold to a seven-year peak. The metal was last up 1% to $1,758 an ounce XAU=.

Oil prices reached their highest since March on a pick-up in demand as countries around the world eased travel restrictions.

Brent crude LCOc1 futures firmed 96 cents to $33.46 a barrel, while U.S. crude CLc1 rose 98 cents to $30.41.

(This story has been refiled to correct spelling and grammar in paragraphs 8 and 9)

Editing by Shri Navaratnam

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Scotiabank profit plunges 40% as bad loans more than double amid COVID-19 – CBC.ca

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Scotiabank posted a profit Tuesday morning of $1.32 billion in the three months up to the end of April, a fall of more than 40 per cent from last year’s level as the bank set aside twice as much money for bad loans.

The bank’s provisions for credit losses totalled nearly $1.85 billion for the quarter. That’s up 111 per cent from the $873 million worth of bad loans the bank revealed in the same three months last year, well before the COVID-19 pandemic crushed the economy.

Higher loan loss provisions don’t necessarily mean that all of those loans will end up defaulting. Rather, it just means that they aren’t being actively being paid back as planned.

The bank revealed on Tuesday that 300,000 of its Canadian customers have applied for some sort of financial relief on the $60 billion they collectively owe to the bank. That would include mortgagees who asked for interest rate deferrals.

Scotiabank has a huge presence in Latin America, and the bank says it has processed two million applications for loan relief from its international customers.

Economic bellwether

Not all of those loans will necessarily end up defaulting, but some may. So the uptick in loan loss provisions is troubling.

Scotia is the first of Canada’s big banks to reveal its financial performance through the current pandemic, numbers which will be closely scrutinized as they are considered to be a bellwether for the broader economy. That’s because pain at other businesses tends to show up on the books of the banks that lend to them.

Canada’s other big banks — Royal, Toronto-Dominion, Canadian Imperial Bank of Commerce and Bank of Montreal — will report earnings in the next few days.

On an adjusted basis, Scotiabank’s profit for the quarter came in at $1.04 per diluted share. That’s well down from $1.70 per diluted share a year ago, but ahead of the 98 cents that analysts who cover the bank were expecting.

Not all bad news

But not all parts of the bank’s business saw tough times. Indeed, some did even better than usual.

Scotia’s global wealth management business posted a profit of $314 million, an increase of four per cent over last year’s level. That uptick came about with investors around the world becoming much more active than usual as global stock markets plummeted.

“This quarter saw record results for both new client account openings and trading volumes in Scotia iTRADE,” the bank said.

Similarly, the global banking and markets business posted a profit of $523 million, up 25 per cent from a year earlier.

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Scotiabank's loan-loss provisions double on coronavirus risks – The Globe and Mail

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A Bank of Nova Scotia building stands in Toronto on Aug. 22, 2017.

Nathan Denette/The Canadian Press

Bank of Nova Scotia on Tuesday reported quarterly profit that beat analysts’ estimates due to a strong performance in the capital markets business, but the bank’s loan loss provisions jumped two-fold.

Provisions for loan losses at Scotia more than doubled to $1.85 billion from a year earlier as it set aside more money to meet future losses.

Canadian banks are expected to face loan defaults as the coronavirus pandemic drives the world into a recession, leaving small and medium-sized businesses scrambling to meet their debt payments.

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The bank said commercial and corporate performing loan provisions increased by $275 million, hurt by the poor macroeconomic outlook and a plunge in oil prices that impacted the energy sector globally.

Adjusted net income at its global wealth management segment rose 3 per cent to $314 million, while profit at the global banking and markets business jumped 25 per cent to $523 million.

Canada’s third-biggest lender said net income fell to $1.24 billion, or $1 per share, in the quarter ended April 30, from $2.13 billion, or $1.73 per share, a year earlier.

On an adjusted basis, the lender earned $1.04 per share, compared with analysts’ estimate for profit of $0.98 per share, according to IBES data from Refinitiv.

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Asian stocks rise, boosted by 're-opening optimism' – CNN

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Japan’s Nikkei 225 (N225) was among the biggest winners in Asia, climbing 2.6% after Prime Minister Shinzo Abe on Monday lifted the state of emergency for the entire nation and gave his support for a huge new stimulus package. Benchmark indexes in Shanghai (SHCOMP) and Taipei added 1%, while Australia’s ASX All Ordinaries added 2.8%
In Europe, Germany’s DAX (DAX) increased by 0.8% in early trading and France’s CAC 40 (CAC40) added 1.3%. The FTSE 100 (UKX) gained more than 2% in London. UK Prime Minister Boris Johnson on Monday announced plans to reopen all shops by the middle of June.
US stock futures also rose after Americans crowded onto packed beaches in Florida, Maryland, Georgia, Virginia and Indiana for the Memorial Day weekend. Many states have begun lifting restrictions on businesses and public spaces.
Dow futures were up 490 points, or around 2%. Futures for the S&P and Nasdaq added 1.9%.
There is a sense of “re-opening optimism” among investors, Stephen Innes, global market strategist at AxiCorp, wrote in a research note.
Oil prices, which have been slammed by the sharp drop in demand caused by the pandemic, jumped during Asian trading hours Tuesday. US crude futures were up 3.7% to trade at $34.46 per barrel. Brent crude, the international oil benchmark, rose 2.3% to $36.36 per barrel.

Hong Kong stocks

Hong Kong’s Hang Seng Index (HSI) advanced more than 2%, recovering some ground after investors were stunned by news last week that Beijing plans to implement a controversial national security law in the financial hub.
The Hang Seng had its worst day in nearly five years on Friday after Beijing said that it would effectively bypass Hong Kong’s legislature to enact the law.
China’s foreign ministry commissioner in Hong Kong, Xie Fang, moved to reassure rattled investors on Monday evening.
The legislation won’t affect freedoms of speech, press, publication and assembly, Xie said, according to state-run news agency Xinhua. Xie added that the controversial legislation will protect the operations of international businesses in Hong Kong.
The “clouds of dust in Hong Kong have settled quicker than anyone had expected. Local risk sentiment isn’t nearly as gnarly as everyone had feared,” said Innes.
Still, the move by Beijing is expected to fuel another round of clashes between pro-democracy protesters in Hong Kong and the city’s police force.
— CNN’s Laura He and Kaori Enjoji contributed to this report.

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