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Equity markets extend rally as China eases curbs

After Tokyo and Hong Kong closed above two percent, London equities crept 0.1 percent ahead two hours from the close while Frankfurt and Paris added around 0.5 percent.

May 30, 2022 / 08:38 PM IST
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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 two percent, London equities crept 0.1 percent ahead two hours from the close while Frankfurt and Paris added 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."

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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.

Rate hikes

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 possibility that China's Covid curbs could be gradually removed helped oil prices rise, with Brent briefly topping $120 per barrel for the first time in two months as traders bet on a pick-up in energy demand.

European leaders began a summit Monday to discuss a Russian oil embargo over the Ukraine war, but Hungarian Prime Minister Viktor Orban warned that the bloc has yet to come up with a compromise that he could agree to.

 
AFP
first published: May 30, 2022 08:37 pm
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