Vaccine Optimism, Positive Economic Data Drive Equities Higher In Asia

Positive economic data and optimism about a potential vaccine have managed to offset rising virus numbers in the US and across the globe. Equities across the board moved higher (MSCI World +3.2%),
 
In Asia, equity markets started the week on the front foot after last week's much stronger-than-expected US employment report.
 
The clearest signal for inflows is through the lens of Asia EM pairs, which are trading stronger with local equities in the green. USD/CNH is under 7.0450, last seen in April, and USD/KRW is down from 1198.
 
Shanghai Composite is +5%. There are a lot of questions on what's driving it. Just looking at the multiple brokers that are limit up, real estate developers massively outperforming, and banks performing inline/outperforming the market, the rally is driven by liquidity.
 
China seems to be perfectly able to look through the gnarly Western media headlines of another global coronavirus record (212k) instead; local investors are listening to the enthusiastic chorus from the nation's influential state media, which are universally singing bullish from the same song page laced with hints of policy easing. The CSI 300 index jumped as much as 4.2% on Monday morning (after surging 7% last week), the Nikkei is up 1.8% while European and US equity futures are up following the Independence weekend in the US and the "first night out" post lockdown in the UK.
 
USD opened the week lower, with China equities up 5% today and as expected, EUR/USD is moving toward 1.1300. However, lets set if London will carry the weaker USD baton. As is so often the case in Asia G-10, volumes have been light although EUR/USD buying is a bit of a standout as some chunky offers were getting lifted throughout the Asia morning. EUR/USD is the only G-10 place to be this week, I think. 

Despite some lingering concerns about the Recovery Fund proposal, it is unlikely the fiscal hawks will be a big enough voice to upend the majority apple carts on this significant step toward fiscal integration in the region and put to rest those concerns about the sustainability of the Euro project.
 
With the EU Summit on July 17, I think it is logical to stay bullish EUR until that date, and unless there is some substantial negative news development, its a case of holding the course. The odds seem heavily tilted toward a European agreement. I think the market will price the positive outcome more aggressively as the date nears.
 
Additionally, the rebound from the corona-crisis in Europe has been much smoother than the US due to better virus control and a much smaller increase in unemployment rates.
 
Also, the long stretch of EU stock market underperformance and years of outflows is starting to reverse. With the euro relatively cheap against the dollar, more sizable EU inflows from the US will likely push the euro higher.