* Europe gains as travel stocks jump nearly 7%
* Holiday firm TUI up 35%, British Airways owner up 20%
* Nikkei rises 2.2% to highest since early March
* S&P 500 futures climb 1.8% to clear 3,000 hurdle
* China central bank says to strengthen economic policy
* Oil gains as supply falls, U.S. rigs hit all-time low
* World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Marc Jones
LONDON, May 26 (Reuters) - World shares forged ahead on
Tuesday and commodity markets drove higher as well, as investors
shrugged off Sino-U.S. tensions to focus on more stimulus in
China and a re-opening world economy.
Britain's FTSE and Japan's Nikkei led their
regions with 1.2% and 2.2% gains, while the S&P 500 was
preparing to go above 3,000 points for the first time since
early March, when the economic impact of the coronavirus was
just becoming clear.
Europe was powered by a near 7% surge in travel and leisure
stocks, including at 35% gain by holiday firm
and 20% jump in British Airways owner IAG, after Spain
said that quarantine-free tourism would resume next month
and as Germany edged towards a 9 billion-euro
bailout of airline Lufthansa.
Italian, Spanish and other southern euro zone government
bonds also gained on the hopes, and a weaker dollar
helped the euro, the pound, and holiday-hotspot currencies like
Turkey's lira and Mexico's peso.
"Investors are trying to be optimistic here and think that
everything is going to be OK," said Christopher Peel, the chief
investment officer of Tavistock Wealth. "You can't fight it ...
I'm not trying to fight it. But it is totally disconnected from
economic reality."
Overnight saw another high-profile casualty of coronavirus
as Latin America's largest airline, LATAM Airlines Group
and its affiliates in Chile, Peru, Colombia, Ecuador
filed for bankruptcy protection in the United States. The car-
rental firm Hertz had done the same on Friday, but
equity markets seemed in no mood to worry.
MSCI's broadest index of Asia-Pacific shares outside Japan
had advanced 1.7% overnight, with South Korea
up 1.75% and Chinese blue chips 1.1% higher
after the country's central bank said it would continue to push
to lower interest rates on loans.
While largely reiterations of past comments, they helped
offset the war of words between Washington and Beijing over
trade, the coronavirus and China's proposals for stricter
security laws in Hong Kong.
"U.S.-China tensions continue to simmer in the background,
but equity investors appear more interested on the prospect of
economies reopening around the globe," said Rodrigo Catril, a
senior FX strategist at NAB.
"On this score, Japan ended its nationwide state of
emergency, Spaniards have returned to bars in Madrid wearing
masks and England will re-open some businesses on June 1."
In addition, Germany wants to end a travel warning for
tourist trips to 31 European countries from June 15 if the
coronavirus situation allows, the news agency dpa reported.
RISING TIDE
Bond investors suspect economies will still need massive
amounts of central bank support long after they re-open, and
that is keeping yields low even as governments borrow much more.
Yields on U.S. 10-year notes were trading at
nearly 0.69% after rising to 0.68% last week, when the market
absorbed a wave of new issuance.
The gains in U.S. yields might have weighed on the dollar
but with rates everywhere near or less than zero, major
currencies have been holding to tight ranges.
The dollar was down against the yen at 107.52, still
within the 105.97 to 108.08 band that has lasted since the start
of May. The euro gained to $1.0954, having spent the
month so far between $1.0765 and $1.1017. The pound climbed 1%
after the Bank of England's chief economist said it was not
"remotely" near taking interest rates negative.
Against a basket of currencies, the dollar was 0.5% lower at
99.160 but still sandwiched between support at 99.001
and resistance around 100.560.
Analysts at CBA felt the dollar could break higher should
China-U.S. tensions actually threaten their trade deal.
"Although not our central scenario, if the U.S. or China
were to withdraw from the Phase One deal, USD would sharply
appreciate while CNH, AUD and NZD would decline," they wrote in
a note to clients.
In commodity markets, gold edged down 0.3% to $1,723 an
ounce.
Oil prices were supported by falling supplies as OPEC cut
production and the number of U.S. and Canadian rigs dropped to
record lows for the third week running.
Brent crude futures rose 71 cents to $36.24 a
barrel. U.S. crude gained $1.14 to $34.39.
(Reporting by Marc Jones, editing by Larry King)
International Airlines (IAG)
