Global stocks rise as Beijing eases Covid restrictions
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Stock markets around the world rose on Monday as a series of positive updates from China including the loosening of some Covid-19 restrictions boosted investors’ confidence.
Wall Street’s benchmark S&P 500 rose as much as 1.5 per cent following solid gains in Europe and Asia earlier in the day, but gave up some of the gains in afternoon trading, closing up 0.3 per cent as rising Treasury yields put renewed pressure on stocks.
The technology-dominated Nasdaq Composite added 0.4 per cent, receiving a further China-related boost after a Wall Street Journal report that Beijing was preparing to lift a ban on ride-hailing app Didi adding new customers.
Didi’s New York-listed shares jumped by more than 20 per cent, and the Golden Dragon index of US-listed Chinese companies rose 5.4 per cent.
Chinese state media on Sunday announced that public transport and restaurant dining would reopen in Beijing, sparking hopes of an end to draconian lockdowns that have slowed the world’s second-largest economy and strained global supply chains.
On Monday, a closely watched survey of business activity also suggested that contraction in the country’s services sector had eased in May.
Concerns about the Chinese economy have combined with worries about the impact of rising interest rates and stubbornly high inflation to weigh on stock markets in recent months. The S&P 500 has fallen for eight of the past nine weeks.
“For China to come out of [lockdowns] will make a big difference,” said Neil Birrell, chief investment officer at Premier Miton Investors. “It will also help stimulate global trade.
However, he added that “in my view I don’t think we’ve hit the bottom” of the stock market downturn.
The S&P is down more than 13 per cent this year while the Nasdaq Composite has dropped more than 22 per cent, as inflation hit consumer-facing businesses and spurred the Federal Reserve to signal aggressive rate rises, along with plans to drain liquidity from the financial system via quantitative tightening.
Data on Friday are expected to show that annual US inflation was 8.3 per cent in May, in line with the previous month’s reading. Sustained inflation combined with a strong jobs report released in the US last week suggested “the Fed will continue to act” by raising interest rates, Birrell said.
The Fed’s main interest rate stands at 0.75 per cent, with money markets predicting a rise to 2.8 per cent by the end of the year. US government bonds came under pressure on Monday, with the yield on the 10-year Treasury note rising 0.09 percentage points to climb back above the closely watched 3 per cent threshold. Yields climb when prices rise.
In Europe, the regional Stoxx 600 share index added 0.9 per cent, but remained almost 9 per cent lower year to date because of the economic impact of Russia’s invasion of Ukraine and soaring consumer prices. Germany’s Xetra Dax gained 1.3 per cent.
In currency markets, sterling gained 0.3 per cent against the dollar to just over $1.25 ahead of UK prime minister Boris Johnson surviving a bruising vote of no confidence in his leadership on Monday.
The euro slipped 0.3 per cent lower to just under $1.07 ahead of this week’s European Central Bank meeting. The bank is widely expected to signal a plan to lift its main deposit, currently at minus 0.5 per cent, by a quarter point in July and return to positive borrowing costs in the eurozone by September.
In Asia, mainland China’s CSI 300 share index added 1.9 per cent and Hong Kong’s Hang Seng rose 2.7 per cent.