(Bloomberg) — Stocks in Europe gained along with US equity futures Monday as Beijing made another move to ease Covid restrictions, helping soothe a fragile mood amid inflation and rate-hike concerns.
Travel stocks led gains in the Stoxx Europe 600 index, while basic resources outperformed as copper surged to its highest since April, with sentiment across industrial metals bolstered by China’s gradual reopening.
The UK benchmark climbed more than 1% as traders returned after a four-day break. Futures on the S&P 500 and Nasdaq 100 rose. Treasuries were steady and the dollar slipped.
Stronger-than-forecast US hiring data for May suggested the Federal Reserve won’t waver from its pace of hiking rates to rein in price pressures.
But Goldman Sachs Group Inc. economists said the Fed may be able to pull off its aggressive rate-hike plan without tipping the country into recession. The easing of Chinese lockdowns will help abate supply-chain pressures, said Diana Mousina, a senior economist at AMP Capital.
“Positive news around Chinese economic activity and cheaper equity valuations could offer value from a long-term investment perspective, but volatility will remain high in the short-term,” Mousina said in a note.
Brent crude oil traded above $120 a barrel after Saudi Arabia signaled confidence in demand with a larger-than-expected price increase in Asia.
Meanwhile, the US was said to be considering allowing more sanctioned Iranian oil onto global markets to counter the decline in Russian supplies.
Japanese equities rose, while technology shares jumped in Hong Kong.
China’s shares advanced as the capital took a step closer to returning to normal. Australian stocks bucked the trend, dropping ahead of an expected second consecutive interest-rate increase Tuesday.
The US jobs report quelled some concern that the world’s biggest economy is slowing too sharply, but also strengthened the view that the Fed will keep hiking rates to combat inflation.
Cleveland Fed President Loretta Mester said she would back a half-point hike in September if inflation isn’t retreating. Market-derived odds for a third 50-basis-point increase in September are about 85%.
The European Central Bank is set to announce an end to bond purchases this week and formally begin the countdown to an increase in borrowing costs in July, joining global peers tightening monetary policy in the face of hot inflation.
The central bank is set to strengthen its commitment to support vulnerable euro-area debt markets if they are hit by a selloff, Financial Times reported.
Read: Team Transitory Is Back Warning Big Rate Hikes Are a Big Mistake
“Liquidity is going out of the market and what that means is it will have an impact on the equity markets,” Charu Chanana, Saxo Capital Markets market strategist, said on Bloomberg Television.
“We do expect that the drawdown in the equity markets still has some room to go.”
Elsewhere, the pound edged higher and gilts fell amid risks around a confidence vote on British Prime Minister Boris Johnson’s leadership.
Tech stocks and crypto are vulnerable in the era of quantitative tightening, our latest MLIV Pulse survey shows.
Read more here.
Key events to watch this week:
- Reserve Bank of Australia policy decision Tuesday
- World Bank’s “Global Economic Prospects” report Tuesday
- Reserve Bank of India rate decision Wednesday
- OECD Economic Outlook, a twice-yearly analysis of major global economic trends and prospects for the next two years.
Wednesday
- European Central Bank rate decision, Christine Lagarde briefing, Thursday
- China trade, new yuan loans, money supply, aggregate financing. Thursday
- US CPI, University of Michigan consumer sentiment Friday
- China CPI, PPI Friday
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.7% as of 8:19 a.m.
London time
- Futures on the S&P 500 rose 0.7%
- Futures on the Nasdaq 100 rose 0.9%
- Futures on the Dow Jones Industrial Average rose 0.6%
- The MSCI Asia Pacific Index rose 0.3%
- The MSCI Emerging Markets Index rose 0.5%
Currencies
- The Bloomberg Dollar Spot Index fell 0.1%
- The euro rose 0.1% to $1.0734
- The Japanese yen rose 0.2% to 130.58 per dollar
- The offshore yuan was little changed at 6.6552 per dollar
- The British pound rose 0.3% to $1.2528
Bonds
- The yield on 10-year Treasuries was little changed at 2.94%
- Germany’s 10-year yield declined one basis point to 1.26%
- Britain’s 10-year yield advanced four basis points to 2.19%
Commodities
- Brent crude rose 0.2% to $119.96 a barrel
- Spot gold rose 0.2% to $1,854.38 an ounce
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