Australian shares have kicked off the week higher as optimistic investors focused more on the COVID-19 economic recovery, rather than concerns about rising US-China tensions.

Key points:The Australian share market has dropped 22pc since its February record highBut it has also surged 23pc from its lows in MarchThe Australian dollar traded between 65.24 and 65.48 US cents on Monday

The ASX 200 index was up 1.5 per cent to 5,582 points by 12:10pm AEST.

The Australian dollar was steady at 65.35 US cents.

Nearly every stock on the benchmark index was trading higher, with some of the best performers being Nine Entertainment (+6.2pc), Afterpay (+7.1pc), Webjet (+15.3pc) and Flight Centre (+15.5pc).

The local share market has clawed back its sharp losses from last Friday (-1pc).

That was sparked by Washington rebuking Beijing for national security laws viewed as a threat to Hong Kong independence, and China’s decision to not give an economic growth forecast for the first time due to the uncertainty caused by the coronavirus pandemic.

Oil leads market rebound

Energy and industrials were the best performing ASX sectors on Monday, despite Brent crude futures falling (-1pc) to $US34.79 per barrel.

However, oil prices have surged 65 per cent in the past month.

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“Real-time analytics queries are providing empirical evidence that automobile use is quickly returning to a state of pre-COVID-19 normalcy, which is unequivocally positive for oil prices,” said AxiCorp’s chief global market strategist Stephen Innes.

“Another great week of gains for oil, although the sharp rally was temporarily interrupted ahead of the US and UK long weekend as traders reflected on China news flow.”

On Monday, Wall Street will be closed for Memorial Day, while British markets will be shut for the Spring Bank public holiday.

“The National People’s Congress announced economic measures were interpreted less dovish than expected and proposed security legislation for Hong Kong weighed on sentiment,” Mr Innes said.

China announced a $430 billion stimulus package on Friday, in a bid to reinvigorate China’s stalled economy.

“Less policy stimulus equates to less infrastructure spending, which is terrible for the commodity market in general, while the Hong Kong security legislation packs on a hefty amount [to] a trade war risk premium,” Mr Innes said.

“The total size of the announced stimulus package is about 3.5 per cent of GDP, which falls short of the market expectation of 5-6 per cent of GDP.”

Iron ore futures fell (-0.6pc) to $US97.65 a tonne, its highest value in around nine months.

Spot gold slipped (-0.5pc) to $US1,726.25 an ounce, but is still trading near a seven-year high.

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