Equity markets extend rally as China eases curbs

Asian stock markets advanced Monday and Europe followed cautiously in their wake on a wave of investor optimism as China eases some of its strict Covid curbs in Shanghai and Beijing.

After Tokyo and Hong Kong closed above percent, London equities crept 0.1 percentage beforehand hours from the near even as Frankfurt and Paris delivered around 0.5 percent.

Asian indices rebounded as traders also digested strong US data and a pre-weekend rally on Wall Street, which was closed Monday for the Memorial Day public holiday.

“Worries about global growth have eased — and hopes (are) that China’s worst Covid woes may be over,” said Hargreaves Lansdown analyst Susannah Streeter.

“There was a ripple of relief across European markets after authorities in Shanghai announced a lifting of restrictions from Wednesday, with more production now expected to begin across the manufacturing and tech hub.”

The prospect of easing Covid curbs has buoyed hopes for the world’s number two economy.

But inflation remains a top concern for investors who worry that central banks could act too harshly to contain it, bringing a halt to the economic recovery.

New data on Monday showed German inflation hitting a new record at 7.9 percent in May as Russia’s invasion of Ukraine fuels higher energy and food prices.

Spanish inflation also surged, rising 8.7 percent year-on-year in May from 8.3 in April.

The readings add to pressure on the European Central Bank to speed up interest rate rises, with a first hike expected in July.

Monday’s gains extended a positive end to last week for global equities, with some commentators saying there was a growing hope that the months-long sell-off may have run its course.

Wall Street provided a strong lead and snapped a series of weekly losses, with Friday’s rally supported by data showing an easing of the key personal consumption expenditures (PCE) price index.

Markets have been pummelled this year as soaring prices — caused by the Ukraine war, supply chain snags, and China’s lockdowns among other things — forced central banks to hike interest rates and warn of more to come.

The US reading lent hope that the worst of the inflation surge may have passed and could allow the Federal Reserve to ease back from its hawkish rate hike drive later in the year.

May jobs data — due for release on Friday — should provide a fresh snapshot of the economy and possibly an idea about the Fed’s next policy moves.

The opportunity that China’s Covid curbs may be gradually removed helped oil prices rise, with Brent, in brief, topping $120 consistent with the barrel for the first time in months as traders wager on a choose-up in electricity calls.

European leaders commenced a summit Monday to discuss a Russian oil embargo over the Ukraine warfare, but Hungarian Prime Minister Viktor Orban warned that the bloc has but to give you a compromise that he may want to agree to.

London – FTSE 100: UP 0.1 percent at 7,588.93 points

Frankfurt – DAX: UP 0.5 percent at 14,536.21

Paris – CAC 40: UP 0.6 percent at 6,553.05

EURO STOXX 50: UP 0.6 percent at 3,833.68

Tokyo – Nikkei 225: UP 2.2 percent at 27,369.43 (close)

Hong Kong – Hang Seng Index: UP 2.1 percent at 21,123.93 (close)

Shanghai – Composite: UP 0.6 percent at 3,149.06 (close)

New York – Dow: UP 1.8 percent at 33,212.96 (close)

Euro/dollar: UP at $1.0765 from $1.0735 on Friday

Pound/dollar: UP at $1.2642 from $1.2631

Euro/pound: UP at 85.16 pence from 84.99 pence

Dollar/yen: UP at 127.65 yen from 127.11 yen

Brent North Sea crude: UP 0.5 percent at $119.96 per barrel

West Texas Intermediate: UP 0.6 percent at $115.66