U.S. stock futures rallied Monday, suggesting that shares may recover ground following their biggest weekly percentage drop in nearly two months.
Contracts tied to the S&P 500 gained 1.8%, signaling that U.S. stocks could advance after the opening bell in New York. The index shed 2.3% last week after a range of data highlighted the sharp contraction in economic activity across the nation.
European indexes also climbed Monday, with the pan-continental Stoxx Europe 600 gauge rising 2.3%. Most major Asian benchmarks ended the day higher.
A relatively quiet weekend that offered no jolts to financial markets bolstered investors’ risk appetite, reflected in a resurgence in stocks. Concerns about a new wave of coronavirus infections with governments easing stay-at-home orders, combined with speculation that most economies face a long and painful road to recovery, have weighed on markets in recent weeks. Barbs exchanged by Washington and Beijing have also stoked worries about a revival in the trade war.
“Markets have a bit of breathing room this week after the selloff last week, when people were heavily fixed on the U.S.-China tensions and a second wave,” said Edward Park, deputy chief investment officer at Brooks Macdonald. “Without new news on those key risks, equities on a long-term basis look relatively attractive compared to bonds.”
In bond markets, the yield on the benchmark 10-year Treasury edged up to 0.654% from 0.640% Friday. Yields move inversely to bond prices.
Travel companies and airlines led gains among European stocks. Holiday provider TUI rose 17%, Ryanair Holdings climbed 10.2% and British Airways owner IAG Group rose 7.3%.
There were several factors behind the rise, said Russ Mould, investment director at AJBell. Major tourist destinations Italy and Greece signaled they would accept tourists from countries where international travel was permitted.
European flight operator Ryanair reported its full-year results Monday and reiterated that it planned to resume 40% of its flights from July. After grounding 99% of its aircraft in April, investors were concerned about missing out on buying the dip, Mr. Mould said.
“There’s an element of get in now; it can’t get worse and it might get sharply better,” he said.
Federal Reserve Chairman Jerome Powell cautioned on Sunday that the U.S. economic recovery could take more than a year. The unemployment rate is likely to keep rising through June and then begin to decrease as businesses reopen, and both the Fed and lawmakers may need to do more to bolster the economy, he said in a broadcast interview.
“If lockdowns might be eased over a longer period of time, that would lead to recovery not really taking place until 2021,” Mr. Park said. “The size of the recession in the first half of 2020 is almost being viewed by markets as a curiosity, as investors believe the growth will be at least partially recouped.”
“The worse the news gets the more support there will be from central banks, and therefore more liquidity, as far as some investors are concerned, which is why they are buying,” Mr. Mould said. “That’s not the main street view, but it seems like the Wall Street view.”
Most equity benchmarks in the Asia-Pacific region were up less than 1%. Japan’s Nikkei 225 gained 0.5%, while the Shanghai Composite Index edged 0.2% higher. Australia’s benchmark S&P/ASX 200 traded 1% higher.
As economies emerge from monthslong lockdowns, markets will tend to creep higher, according to Paul Chew, head of research at Phillip Securities in Singapore. But a stronger rally would have to wait until investors believed there is little risk of a big second wave of infections, he said.
Virus-related news has been a bigger driver of stocks than economic data, which are lagging indicators, Mr. Chew said. “Even with better economic numbers, the market won’t rejoice,” he added.
Fresh data Monday showed Japan’s economy, the world’s third-largest after the U.S. and China, fell into a recession in the first quarter. The economy shrank an annualized 3.4% in the three months ended March 31 after a 7.3% contraction in the previous quarter. Economists expect Japan’s economy to shrink by an annualized 20% or more this quarter as the pandemic keeps tourists away and depresses spending by households and companies.
Commodity markets built on last week’s rallies. Gold futures rose nearly 1%, rising for a fifth consecutive session, and putting the metal on course for a multiyear settling high.
Contracts for delivery of West Texas Intermediate in July rose to over $30 a barrel for the first time since mid-March. Brent crude, the global oil benchmark, rose 5.8% to $34.39 a barrel.
Screens showing market movements in Tokyo earlier in the day.
Photo: kazuhiro nogi/Agence France-Presse/Getty ImagesWrite to Anna Isaac at anna.isaac@wsj.com and Chong Koh Ping at chong.kohping@wsj.com
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