World stock markets rose on Monday as a series of positive updates from China, including the easing of some restrictions on Covid-19, boosted investor confidence.
Wall Street’s S&P 500 benchmark rose as much as 1.5 percent after solid gains in Europe and Asia earlier in the day, but dropped some of its afternoon trading gains, closing 0.3 percent as rising returns of government bonds put new pressure on stocks.
The technology-dominated Nasdaq Composite added 0.4 percent, receiving an additional boost related to China after a Wall Street Journal report that Beijing was preparing to lift a ban on the Didi travel app, which adds new customers.
Shares of Didi, listed in New York, jumped more than 20%, and the Golden Dragon index of Chinese companies traded in the United States rose 5.4%.
China’s state media announced on Sunday that public transport and restaurants would reopen in Beijing, raising hopes for an end to draconian blockades that have slowed the world’s second-largest economy and strained global supply chains.
A carefully monitored business activity survey on Monday also showed that the contraction in the country’s services sector slowed in May.
Concerns about the Chinese economy are combined with concerns about the impact of rising interest rates and persistently high inflation that have weighed on stock markets in recent months. The S&P 500 has fallen in eight of the last nine weeks.
“For China to come out [lockdowns] will make a big difference, “said Neil Birel, chief investment officer at Premier Miton Investors. “It will also help boost world trade.
However, he added that “I don’t think we have reached the bottom” of the stock market downturn.
S&P fell more than 13 percent this year, while the Nasdaq Composite fell more than 22 percent as inflation hit consumer-oriented businesses and prompted the Federal Reserve to signal an aggressive rise in interest rates, along with plans to drain liquidity from financial system through quantitative tightening.
Friday’s data is expected to show that annual inflation in the United States was 8.3% in May, according to previous month’s figures. Steady inflation, combined with a strong job report released in the United States last week, suggests the Fed will “continue to act” by raising interest rates, Birel said.
The Fed’s key interest rate is 0.75%, with money markets forecast to rise to 2.8% by the end of the year. US government bonds came under pressure on Monday, with 10-year government securities yields rising 0.09 percentage points to rise above a carefully monitored 3 per cent threshold. Profitability rises when prices rise.
In Europe, the Stoxx 600 regional stock index added 0.9%, but remained almost 9% lower this year due to the economic impact of Russia’s invasion of Ukraine and rising consumer prices. The German Xetra Dax rose 1.3%.
In foreign exchange markets, sterling rose 0.3 percent against the dollar to just over $ 1.25 ahead of UK Prime Minister Boris Johnson, who survived a rough vote of no confidence in his leadership on Monday.
The euro fell 0.3% to just under $ 1.07 ahead of the European Central Bank’s meeting this week. The bank is expected to signal a plan to withdraw its main deposit, which is currently minus 0.5%, by a quarter of a point in July and return to positive lending costs in the euro area by September.
In Asia, the CSI 300 stock index of mainland China added 1.9% and Hong Kong’s Hang Seng rose 2.7%.
Add Comment