Global shares rose on Tuesday, extending gains from the previous session, as traders balanced signs of slowing global growth with news that China was easing Covid quarantine restrictions.
In Europe, the regional Stoxx 600 index added 0.5 per cent. London’s FTSE 100 rose 1.1 per cent. A FTSE gauge of emerging and developed market stocks ticked 0.2 per cent higher.
Earlier in the day, China announced that mainland quarantine requirements for all arrivals would be cut from 21 to 10 days, with visitors to the mainland from Hong Kong only required to quarantine for seven days.
Hong Kong’s Hang Seng index swung from a loss to close up 0.9 per cent following the announcement, while China’s CSI 300 index of Shanghai and Shenzhen-listed stocks rallied late in the afternoon session to close up 1 per cent.
“While everyone else is tightening because of inflation, China is out of sync to the rest of the world,” said Mary Nicola, multi-asset portfolio manager at PineBridge Investments based in Singapore. PineBridge has “started dipping our toes in Chinese equities” to take advantage of a rebound in activity, she added.
The partial relaxation of Covid restrictions in the world’s second-largest economy came after a flurry of disappointing economic data from across the globe, with weaker-than-expected surveys of business activity last week. A report on Tuesday found that German consumer sentiment, based on economic and income expectations, had dropped to a new record low — albeit July’s projection was broadly in line with consensus forecasts.
A French consumer survey for June also showed a further decline, slightly below economists’ predictions.
Later in the session, a US-focused report will give clues about how scorching inflation has hit American consumer sentiment. In recent days, expectations of how far the Federal Reserve will raise borrowing costs have fallen, as the US central bank balances efforts to curb price growth with the possibility of recession.
Futures contracts tracking Wall Street’s S&P 500 added 0.5 per cent, after the broad index lost 0.3 per cent on Monday.
The moves in equity markets on Tuesday came shortly before the quarter-end, a time when fund managers typically rebalance their portfolios — a process that can contribute to asset price swings.
In government debt markets, the yield on the 10-year German Bund, a benchmark for eurozone borrowing costs, rose 0.09 percentage points to 1.64 per cent, reflecting a drop in the debt instrument’s price.
Speaking at the European Central Bank’s annual forum in Portugal on Tuesday, Christine Lagarde, president of the bank, said it would act in a “determined and sustained manner” to tackle inflation pressures that were “broadening and intensifying”. Lagarde echoed signals from the ECB earlier this month that it would raise interest rates for the first time in more than a decade at its July meeting, starting with a 0.25 percentage point increase.
The ECB has also indicated it could go further in September, as it moves to curb inflation which hit 8.1 per cent in the bloc in May.
The yield on the 10-year US Treasury note rose 0.04 percentage points to 3.23 per cent.
In commodities markets, Brent crude continued to rise in price after the G7 indicated it was ready to explore caps on energy prices to limit Russian revenues. The international oil benchmark added 2 per cent to reach $117.34 a barrel.
