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MORNING BID-U.S. re-opening plans help markets overlook China GDP contraction

A look at the day ahead from emerging markets chief correspondent Karin Strohecker. The views expressed are her own.

China’s historic first-quarter contraction in gross domestic product did little to stymie an equity rally pinned on hopes that some degree of normality could soon return to virus-stricken economies as President Donald Trump outlines gradual plans to re-open the U.S. economy. Markets in Asia took China’s 6.8% year-on-year GDP tumble in their stride and the numbers nurtured hopes for more stimulus measures ahead.

Yet the data paints a mixed picture of how the world’s second-largest economy - the first to have gone into lockdown – has fared in recent week. March factory activity declined less than expected, but declines in retail sales and fixed-asset investments disappointed.

Nonetheless, European markets are following Asia's strong lead, where Japan's Nikkei climbed 3.25% to a six-week high and Chinese blue chips jumped 1.4%.

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Frankfurt jumped 3% in early trade and Paris, London and Milan nearly matched those gains. While stocks are broadly rising, corporate news is pretty mixed. In a gloomy day for autos, data shows passenger car sales tumbled by more than 50% in Europe's major markets. That comes just after Volkswagen withdrew its 2020 guidance after operating profit to dropped 81% in the first quarter.

Orange weighed on enthusiasm in the telecom sector, one of the most resilient during this coronavirus crisis, after it cut its dividend for 2019 and put its pay-out policy under review. M&A speculation surrounding 5G network-equipment maker Nokia had boosted sentiment on Thursday.

L'Oreal, the world's biggest beauty firm by sales, provided an upbeat outlook last night despite a 4.8% fall in comparable first-quarter sales.

U.S. S&P 500 futures hit a five-week high and point to a 3% jump at open on Wall Street.

In fixed-income markets, Italian bonds were poised for a third day of gains after French President Emanuel Macron expressed support for joint euro zone debt issuance. European countries have "no choice" but to set up a fund or face populists winning in Italy, Spain and possibly France, he said.

But in a sign that the search for safety is still under way, 10-year German bund yields were set to close the week lower for the first time in three weeks. U.S. Treasury yields also ended the week lower following a batch of dire U.S. jobs and housing in recent days.

In currency markets, the dollar held steady after the newfound optimism snuffed out an earlier rally. The safe-haven yen was still down 0.2% and the euro was treading water against the dollar.

In emerging markets, the equity benchmark rose 1.8% in its best day in more than a week, lifted by the healthy gains in Asia. Currencies gained some breathing space from a tepid dollar.