Asian and European equities shot higher Tuesday as growing fears about a possible second wave of infections was overshadowed by the US Federal Reserve's launch of a massive programme to support Main Street businesses hit by the virus lockdown.

The rally across the region helped wipe out most of the losses suffered Monday following news of a spike in new cases in Beijing, Florida, Texas and Tokyo, among other places.

Investors were also taking heart from reports the US is eyeing a huge infrastructure stimulus as well as the easing of lockdowns around the world, with several European countries opening their borders and British shops trading again.

But the main driver of the gains was the Fed's Main Street Lending Program and an emergency lifeline under which the Fed will buy up to $750 billion in corporate bonds.

The Fed several times in recent weeks was on the verge of rolling out the Main Street scheme, but held off as it expanded the criteria to reach more struggling companies.

The plan is part of a massive financial backstop put in place by the bank to protect the economy from the worst of the virus crisis. The government has also pledged trillions of dollars in stimulus support.

The US Chamber of Commerce called it "a lifeline for businesses that have been disrupted by the health and economic consequences of COVID-19".

Fed boss Jerome Powell will give two days of congressional testimony from Tuesday, which observers will be following after he caused ructions on markets last week with a sobering warning about the economic outlook.

- New total lockdowns 'unlikely' -

The announcement saw all three main indexes on Wall Street reverse early losses to end well up, and the gains filtered through to Asia.

Tokyo soared almost five percent, getting an extra boost from a Bank of Japan move to ramp up aid for firms struggling with virus fallout.

Seoul surged more than five percent and Sydney almost four percent, while Hong Kong jumped 2.4 percent and Shanghai more than one percent.

Mumbai, Taipei and Manila were also more than one percent up, Jakarta 3.2 percent higher and Bangkok 2.5 percent up. Wellington edged up 0.8 percent.

London, Paris and Frankfurt all rose more than two percent.

"With the Federal Reserve back in business backstopping corporate credit, and printing money to lend to companies directly, it was immediately back to business-as-usual for the peak-virus, buy everything herd," said OANDA's Jeffrey Halley.

There remains a sense of unease about signs of a COVID-19 resurgence, with Beijing locking down a number of estates after more than 100 people were diagnosed with the disease, just as the city was getting back on track and after months of no new cases.

"A cluster like this is a concern and it needs to be investigated and controlled -- and that is exactly what the Chinese authorities are doing," WHO emergencies director Mike Ryan said.

But AxiCorp's Stephen Innes pointed out that investors were getting too used to the fact that the disease will not disappear without a vaccine but new clusters could be contained rather than governments shutting down entire economies again.

"While the run of COVID-19 headlines emphasize that a demand recovery is likely to be a slow process, it seems unlikely that we see a return to the lockdown measures" of the first half of the year, he said in a note.

The return to buying of riskier assets and selling of safe havens saw the dollar tumble against most currencies, with the Australian dollar and Mexican peso around two percent higher and the South Korean won 0.8 percent up.

- Key figures around 0810 GMT -

Tokyo - Nikkei 225: UP 4.9 percent at 22,582.21 (close)

Hong Kong - Hang Seng: UP 2.4 percent at 24,344.09 (close)

Shanghai - Composite: UP 1.4 percent at 2,931.75 (close)

London - FTSE 100: UP 2.6 percent at 6,222.60

West Texas Intermediate: UP 0.3 percent at $37.22 per barrel

Brent North Sea crude: UP 0.6 percent at $39.97 per barrel

Euro/dollar: UP at $1.1320 from $1.1317 at 2045 GMT

Dollar/yen: DOWN at 107.33 yen from 107.37 yen

Pound/dollar: UP at $1.2617 from $1.2596

Euro/pound: DOWN at 89.71 pence from 89.85 pence

New York - Dow: UP 0.6 percent at 25,763.16 (close)

dan/gle

BMO GROUPE FINANCIER

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Stocks track US rout as rally hits roadblock, second virus wave appears
Hong Kong (AFP) June 12, 2020
Equities and oil sank Friday while the dollar rallied as investors ran for the hills following the worst Wall Street rout since March, fuelled by worries about the economic recovery and a second virus wave in the US. World markets have blasted higher since hitting a deep trough three months ago, supported by trillions of dollars in government and central bank help and an easing of lockdown measures. But the optimism on trading floors was shattered Wednesday when Federal Reserve boss Jerome Powel ... read more