LONDON, Dec 27 (Reuters) – Stock markets rallied on Tuesday after China said it was lifting a COVID-19 quarantine rule for incoming travelers – a key step in reopening its borders.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) It rose 0.6%, outperforming an index of global shares, which rose 0.2%. China’s bluechip rose 1%.
Pan-European STOXX 600 index (.STOXX) Up 0.5%, tracking a rally in Asia, a small gain against losses of nearly 12% this year, as aggressive monetary policy tightening by central banks hit European shares hard.
U.S. stock futures, the S&P 500 e-minis, rose 0.7%, indicating the market will rise as traders return to their terminals on Tuesday after the Christmas break.
Markets were closed in some areas including London, Dublin, Hong Kong and Australia.
Bonds fell as yields, which move against prices, hit a nine-week high on Tuesday, with Germany’s two-year yield trading at 2.489%, the highest since 2008, while Italian bond yields rose 11 basis points to 4.622%. .
According to Florian Ailbo, head of macro at Lombard Odier investment managers, European bond markets have yet to hit peak rates, with the European Central Bank (ECB) lagging behind the US Federal Reserve’s jumbo rate.
The broader picture looks bullish, he said, pointing to credit spreads and prices in the broader derivatives markets. The (.VIX)It has fallen 35% since early October as investors have grown increasingly optimistic that inflation has peaked.
“What we’re seeing today, with the China rally and bullish prices in commodity futures, played out in the summer of 2008 and appears to us to be the end of a cycle,” Ielpo said.
“With a total decline of 20% this year, 2022 may not be the weakest year for global equity markets since the financial crisis of 2008,” said Laura Mohdadi, analyst at SEB Bank.
“Last week we saw the biggest rise in the US 10-year yield since April, which ended Friday trading at 3.75%,” he said.
Yields on two-year Japanese government bonds (JGBs) rose to their highest in more than seven-and-a-half years on Tuesday, as bids for notes with similar maturities drew relatively weak demand.
The dollar fell 0.1% against a basket of major currencies. The euro rose 0.25% to $1.066 against the dollar.
Commodity currencies such as the New Zealand and Australian dollars also rose. read more
Oil prices rose in thin trade on worries that winter storms across the United States could affect logistics and petroleum products and shale oil production. read more
Brent crude was up 0.9% at $84.68 a barrel, while U.S. West Texas Intermediate crude was up 0.8% at $80.22.
US Treasuries will resume trading on Tuesday after a public holiday on Monday. The benchmark 10-year yield hit its highest level since early April last week, closing at around 3.75%.
The two-year JGB yield rose to 0.040%, its highest since March 2015, before easing to 0.030%.
Analysts at Citi flagged a downside risk in a report on Friday, saying the central bank’s policy rate could reach 5.25% to 5.50% by the end of 2023.
Their forecast is largely based on expectations of job additions in the first months of 2023, which, while already tight, will put further upward pressure on wages and prices of non-housing services, prompting the central bank to raise rates further. Quickly.
Report by Nell Mackenzie; Additional reporting by Xie Yu and Ankur Panerjee; Editing by Simon Cameron-Moore
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