LONDON, Dec 27 (Reuters) – Stock markets rose on Tuesday after China said it would remove its COVID-19 quarantine rule for incoming travelers, a major step in reopening its borders.
MSCI’s broadest index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) rose 0.6%, outperforming an index of global stocks, which rose 0.2%. China’s bluechip gained 1%.
The pan-European STOXX 600 index (.STOXX) It rose 0.5%, following the rally in Asia, a small gain from the almost 12% it has lost this year, as aggressive monetary tightening by central banks has hit European stocks hard.
US stock futures, the S&P 500 e-minis, were up 0.7%, signaling the market is poised to go higher as traders head back to their terminals on Tuesday after the spring break. Christmas.
Markets in some regions, such as London, Dublin, Hong Kong and Australia, remain closed.
The value of the bonds fell as yields, which move inversely to price, hit a nine-week high on Tuesday, with German two-year yields at their highest level since 2008 to trade around 2.489%, while Italian bond yields rose 11 basis points to 4.622%. .
European bond markets have yet to hit all-time highs, with the European Central Bank (ECB) lagging behind the US Federal Reserve’s jumbo rate hikes, according to Florian Ielpo, Lombard’s macro chief. Odier Investment Managers.
The overall picture looks bullish, he said, pointing to prices in credit spreads and in the broader derivatives markets. The (.VIX)often seen as an indicator of risk aversion, it has fallen 35% since early October as investors become more confident that inflation has peaked.
“What we’re seeing today, with a rebound in China and rising prices in commodity futures, is what happened in the summer of 2008 and looks like an end-of-cycle moment to us,” Ielpo said.
“With a total drop of around 20% this year, it will take a small miracle for 2022 not to be the weakest year for global stock markets since the 2008 financial crisis,” said Lara Mohtadi, an analyst at SEB Bank.
“Last week we also saw the biggest rise in US 10-year bond yields since April and on Friday trading ended at 3.75%,” he said.
The yield on two-year Japanese government bonds (JGB) jumped to its highest level in more than seven and a half years on Tuesday, as an auction of notes with the same maturity received relatively weak demand.
The dollar fell 0.1% against a basket of major currencies. The euro was up 0.25% against the dollar at $1.066.
Commodity currencies such as the New Zealand dollar and Australian dollar also rose. read more
Oil prices rose on weak trading activity, amid concerns that winter storms in the United States would affect logistics and production of oil products and shale oil. read more
Brent crude was up 0.9% at $84.68 a barrel, while US West Texas Intermediate crude was also up 0.8% at $80.22 a barrel.
US Treasuries will resume trading on Tuesday after a public holiday on Monday. The benchmark 10-year yield rose the most last week from early April, closing around 3.75%.
The two-year JGB yield rose to 0.040%, its highest level since March 2015, before falling to 0.030%.
Citi analysts flagged an upside risk in a report Friday that the Fed’s policy rate could reach 5.25% to 5.50% by the end of 2023.
His forecast was largely based on expectations that the labor market would continue to add jobs in the first few months of 2023 despite already being very tight, putting more upward pressure on wages and the prices of services than they are not housing, which would require the Fed to raise rates further. quickly.
Reporting by Nell Mackenzie; Additional reporting by Xie Yu and Ankur Banerjee; Edited by Simon Cameron-Moore
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