Global shares rose on Tuesday as traders balanced signs of slowing growth with news that China was easing Covid quarantine restrictions.
Wall Street’s S&P 500 rose 1 per cent after the opening bell, while the tech-heavy Nasdaq Composite added 0.7 per cent — remaining 26 per cent lower for the year. Europe’s regional Stoxx 600 index added 0.9 per cent. In turn, a broad FTSE gauge of emerging and developed market stocks gained 0.7 per cent.
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 added 1 per cent.
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.
Meanwhile, in recent days, expectations of how far the US Federal Reserve will raise borrowing costs have fallen, as the central bank balances efforts to curb scorching inflation with the possibility of recession.
“The market is interpreting weak activity data as a sign that central banks will be less hawkish,” said James Ashley, head of international market strategy at Goldman Sachs Asset Management. “Even though the economy is slowing, it alleviates fears of higher interest rates.”
However, he added: “I’m a bit concerned the market is underplaying the significance of inflation numbers to central banks . . . inflation is the dominant concern.”
Tuesday’s equity market moves 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, the president Christine Lagarde 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 indicated it could go further in September, as it moves to curb inflation which hit 8.1 per cent in the eurozone in May.
The yield on the 10-year US Treasury note rose 0.03 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 costs to limit Russian revenues. The international oil benchmark added 1.1 per cent to $116.35 a barrel.
