Oil and Stocks Rise on Hopes of looser COVID Curbs in China: Markets Wrap

(CTN News) – The yuan rose, and the dollar fell Tuesday as market demand for riskier assets increased. Stocks and oil rose on optimism that public turmoil in China would compel an early easing of COVID-19 limitations in the world’s largest economy.

The Euro STOXX 600 (.STOXX), which had just seen its lowest session over two weeks, increased by 0.4%. Markets in Frankfurt (.GDAXI) and Paris (.FCHI) both saw gains of between 0.2% and 0.3%, while shares in London (.FTSE) rose by 0.8%.

After a government official said that China would keep adjusting its policies to lessen the negative effects of its “Zero COVID” on society, hopes for a quicker loosening of its severe restrictions surged.

Three years into the COVID epidemic, simmering resentment with Beijing’s strict COVID preventive efforts exploded over the weekend into larger demonstrations in Chinese cities spread across vast distances.

Hugh Gimber, a global market strategist at JP Morgan Asset Management, said, “China is the major story in markets at the moment, and the pattern of risk assets that we have seen overnight is what we would anticipate given better news.”

Positive economic news for China is good economic news for the whole world.

While S&P 500 futures increased by 0.5% and Nasdaq futures by 0.7%, the MSCI global stock index (.MIWD00000PUS), which covers equities in 47 nations, increased by 0.3%.

Oil prices rose due to the abrupt uptick in confidence towards China and the discussion of potential supply curbs by OPEC+.

After overnight reaching their lowest level of the year, U.S. crude futures increased $1.53 to $78.78 a barrel, while Brent increased $1.83 to $85.12.

As investors shifted their attention to riskier investments, European government bonds increased, and the yield on the benchmark German 10-year Bund decreased by about 9 basis points.

The dollar lost all of its Monday gains as it dropped 0.5% versus a basket of currencies to 106.06 and 0.9% against the offshore yuan to 7.1830.

Before that, the.MIAPJ0000PUS, the broadest MSCI index of Asia-Pacific equities outside of Japan, rose 1.8%.

Following the lifting of the country’s securities regulator’s restriction on equity refinancing for listed property enterprises, shares of Chinese real estate companies rose sharply.

As a result, Chinese blue chips (.CSI300) increased by about 3%, marking the biggest one-day rise in a month and a significant turnaround from Monday’s precipitous declines.

Higher For Longer

Thomas Barkin, president of the Richmond Federal Reserve Bank, is the newest official to end rumors that the Federal Reserve would soon change its stance on interest rates in the next year.

Due to the market’s need for a policy change, Fed Chair Jerome Powell’s speech on Wednesday is expected to be a big message event due to the increased tensions.

Analysts believe they could be let down.

According to Jan Nevruzi, an analyst at NatWest Markets, “we envision him confirming a slower pace of hikes at the December meeting, which is almost entirely priced in.”

But we also anticipate seeing him underline the Fed’s intention to maintain its tight stance until next year.

The president of the European Central Bank, Christine Lagarde, has cautioned that inflation in the eurozone has not peaked and may rise much higher, joining the Fed in her hawkish stance.

The euro increased by 0.4% to $1.0385 overnight, reaching a five-month high of $1.0497.

According to preliminary statistics released on Tuesday, consumer prices in Spain increased 6.8% in November, a lower rate than the 7.3% seen in the year to October.

The data caused the two-year bond rates in Spain to drop by 9.5 basis points to 2.310%.

Before the major eurozone report on Wednesday, Germany’s inflation data is expected later on Tuesday.

Related CTN News:

China Will launch the Shenzhou-15 Spacecraft to its Space Station today