Wall Street stocks rose on Monday after China loosened some Covid-19 restrictions, soothing markets that have been unsettled by concerns over global central bank rate rises to tackle persistently high inflation.
The S&P 500 added 0.9 per cent at the open, as the market mood brightened following a long grind lower for US equities. The S&P has fallen for eight of the last nine weeks.
The technology-heavy Nasdaq Composite added 1.6 per cent, boosted by US-listed Chinese tech stocks following a Wall Street Journal report that Beijing would lift a ban on ride-hailing app Didi adding new users. New York listed shares in the group rose more than 50 per cent in early dealings.
Chinese state media on Sunday announced that public transport and restaurant dining would reopen in Beijing, sparking hopes of an end to draconian lockdowns that have slowed the world’s second-largest economy and strained global supply chains. A contraction of China’s services sector also eased in May, a closely watched business activity survey showed on Monday.
“For China to come out of [lockdowns] will make a big difference,” said Neil Birrell, chief investment officer at Premier Miton Investors. “It will also help stimulate global trade.
“But in my view I don’t think we’ve hit the bottom” of the stock market downturn, he added.
The S&P is down almost 14 per cent so far this year while the Nasdaq Composite has dropped 22 per cent, after inflation hit consumer-facing businesses and spurred the Federal Reserve to signal aggressive rate rises, along with plans to drain liquidity from the financial system via quantitative tightening.
Data on Friday are expected to show that US inflation hit 8.3 per cent in May on an annual basis, according to a Reuters poll, in line with the previous month’s reading. Sustained inflation combined with a strong jobs report released in the US last week suggested “the Fed will continue to act” by raising interest rates, Birrell said.
The Fed’s main funds rate stands at 0.75 per cent, with money markets predicting a rise to 2.8 per cent by the end of the year. The yield on the 10-year US Treasury note rose 0.03 percentage points to 2.98 per cent as the price of the benchmark debt instrument fell.
In Europe, the regional Stoxx 600 share index added 1.2 per cent, remaining almost 9 per cent lower year to date because of the economic impact of Russia’s invasion of Ukraine and soaring consumer prices. London’s FTSE 100 added 1.4 per cent, with energy stocks rising after Saudi Arabia raised oil prices for Asian buyers. Germany’s Xetra Dax gained 1 per cent.
In currency markets, sterling gained 0.5 per cent against the dollar to $1.25 ahead of UK prime minister Boris Johnson facing a vote of no confidence in his leadership on Monday.
The euro slipped 0.1 per cent lower to $1.07 ahead of this week’s European Central Bank meeting. The bank is widely expected to signal a plan to lift its main deposit rate, currently at minus 0.5 per cent, by a quarter point in July and return to positive borrowing costs in the eurozone by September.
In Asia, mainland China’s CSI 300 share index added 1.9 per cent and Hong Kong’s Hang Seng rose 2.7 per cent.
