European shares and US futures rose on Monday after China eased some Covid-19 restrictions, calming markets already roiled by worries about rising bank rates. global central bank to address persistently high inflation.
The Stoxx Europe 600 share index is up 0.9 percent, but remains nearly 9% lower so far due to the economic impact of Russia’s invasion of Ukraine and soaring consumer prices. London’s FTSE 100 rose 1.2%, with energy stocks rising after Saudi Arabia raised oil prices for Asian buyers. Germany’s Xetra Dax rose 1%.
Commodity futures trade implies that Wall Street’s S&P 500 will gain 1.1% at the New York open, after the blue-chip stock index fell eight of the past nine weeks. Contracts that track the tech-heavy Nasdaq 100 added 1.5%.
The S&P Index is down nearly 14% so far this year while the Nasdaq Composite is down 23%, after inflation hit consumer-oriented businesses and prompted the Federal Reserve to signal strong interest rate hikes, along with plans to withdraw liquidity from the financial system through quantitative tightening.
However, the market mood was brighter on Monday, after Chinese state media said public transport and restaurants would reopen in Beijing, stoking hopes of a recession. end the draconian lockdown that has slowed the world’s second-largest economy and strained global supply chain. A closely watched survey of business activity showed on Monday.
“Let China get out” [lockdowns]Neil Birrell, Chief Investment Officer at Premier Miton Investors, said. “It will also help stimulate global trade.
“But in my view, I don’t think we’ve bottomed out” of the stock market downturn, he added.
Data on Friday is expected to show US inflation hit 8.3% in May on a year-over-year basis, according to a Reuters poll, in line with last month’s results. But last week’s strong jobs data suggests “the Fed will continue to act,” by raising rates, Birrell said.
The Fed’s main fund rate is at 0.75%, with money markets predicting a rise to 2.8% later this year.
In currency markets, the pound rose 0.6 percent against the dollar, $1.26 lower ahead of British prime minister Boris Johnson face a vote of no confidence in his leadership on Monday.
The euro rose 0.1% to more than $1.07 ahead of the European Central Bank meeting this week. The bank is expected to signal its plan to raise its main deposit rate, currently negative 0.5%, by a quarter in July and return to positive borrowing costs in euro area in September.
Italian government bonds consolidate after Financial Times reported The ECB will support the debt markets of weaker eurozone countries if they are sold off due to concerns about funding costs.
Yields on Italian 10-year notes fell 0.05 percentage points to 3.36% as debt prices rose.
This comes after the spread between the Italian and German 10-year bond yields – the benchmark for borrowing rates in the two countries – rose last week to its highest level since early 2020.
In Asia, mainland China’s CSI 300 stock index rose 1.9% and Hong Kong’s Hang Seng gained 2.7%.
