GENEVA — Asian equities gained as investors shrugged off worries regarding the escalating US-China tensions and raised their hopes on a potential COVID vaccine proposed by the American biotech company Novavax, which has just started human tests. The Nikkei and ASX 200 rallied 2.63% and 2.32% respectively. Hang Seng rebounded 1.87% as China promised that the new national security law as proposed won’t change the ‘one country two systems’ policy — which is crucial for international businesses operating in Hong Kong, while Shanghai’s Composite advanced 0.70%. Solid purchases in US, UK and European futures also hint at a strong positive open on Tuesday. The US dollar index slipped below the 100 level as a sign of improved market sentiment, though the vaccine hopes tend to be ephemeral and the risk of a sudden reversal in risk appetite looms. The most important to investors is the steady decline in coronavirus cases as economies gradually restart operating. The major risk to the medium-term recovery is a second wave of contagion, which could threaten the already-weakened businesses. All other worries, including the US-China tensions are dwarfed and shouldn’t have a meaningful impact on steadily bettering global risk appetite. The yen is down for the third trading day and the Swiss franc is stable near the 0.97 level against the greenback. But gold traders have a steady grip near the $1,725 an ounce as a hedge against the risk of a sudden slump in risk sentiment. The latest developments between the US and China could jeopardize the recent advance in risk assets and pull capital back to gold. But if the market proves resilient to US-China threats, gold could give in to top-selling pressures and retreat toward $1,700/1,680 area. Meanwhile, both the euro and the pound benefit from a softening US dollar to recover a part of recent losses. Released this morning, the Gfk German consumer climate printed a slightly lower figure than expected in June, but the kneejerk retreat in the euro remained almost imperceptible. The single currency is capable of pulling out 1.0932, the 100-day moving average resistance, but the battle against the 1.10 offers will be fierce, as the 200-day moving average has been a solid trigger for sellers since March. Furthermore, the euro is a less preferred refuge for risk averse investors, especially given the controversies at the heart of the EU regarding the size and the form of a fiscal stimulus package targeting the coronavirus-led economic slowdown, and the European Central Bank’s (ECB) potentially diminished firepower to act as a safety net if things don’t work out well with the ‘frugal four’. The single currency should remain fragile prior to the 1.10 mark before the ECB’s Financial Stability review today and Christine Lagarde’s speech on Wednesday. Sterling on the other hand recovered above the 1.2220 mark against the US dollar, after buyers found a solid ground near the 1.2170/1.2160 area. Meanwhile, anger against Dominic Cummings choice to travel long-distance against law during the coronavirus lockdown is losing steam. Although divisive among Tories, the Cummings affair will certainly have no additional impact on the pound’s course, unless Johnson’s support to Cummings causes him a severer headache, which we doubt. Cable has room for further recovery to 1.2300/1.2355 (last week resistance / 50-day moving average) but offers will likely be felt stronger above this area. Finally, WTI crude is preparing to test $35 per barrel on optimism that the worldwide business reopening should boost the basic energy demand and on news that Russia cut its oil production to nearly meet its 8.5-million-barrel per day target in May and June, after unwillingly agreeing to lower supply with other OPEC+ countries. Prospects of a sustainable global pick-up in demand and lower supply should continue giving support to oil prices, yet the $40 level will likely cap the upside potential due to rising trade uncertainties between the US and China. — The writer is senior analyst at Swissquote Bank