Stocks and oil rise on hopes of easing COVID restrictions in China

  • Euro STOXX 600 up 0.4%
  • Oil prices bounce off China hopes, talk of production cuts
  • Dollar drops as investors seek riskier assets
  • China real estate stocks rally in political support
  • http://tmsnrt.rs/2yaDPgn

LONDON/SYDNEY, Nov 29 (Reuters) – Stocks and oil gained on Tuesday on hopes that public unrest in China could lead to an earlier easing of COVID-19 restrictions in the world’s biggest economy, with the yuan up and the dollar down as investors’ appetite for riskier assets increased.

The Euro STOXX 600 (.STOXX) gained 0.4%, recovering from its worst session in nearly two weeks a day earlier. Actions in London (.FTSE) are up by 0.8% and the Parisian markets (.FCHI) and Frankfurt (.GDAXI) gained about 0.2% to 0.3%.

Hopes for a faster easing China’s strict restrictions increased after an official said they would continue to fine-tune the policy to reduce the impact of its “Zero COVID” on society.

Simmering dissatisfaction with Beijing’s strict COVID prevention policies three years into the pandemic ignited over the weekend into wider protests in Chinese cities thousands of miles apart.

“China is the dominant story in the markets right now, and the risk asset pattern we’ve seen overnight is what we’d expect with better news,” said strategist Hugh Gimber. of the global market at JP Morgan Asset Management.

“Positive news for the Chinese economy is positive news for the global economy.”

The MSCI Global Equity Index (.MIWD00000PUS)which tracks stocks in 47 countries, rose 0.3%, while S&P 500 futures rose 0.5% and Nasdaq futures rose 0.7%.

The sudden surge of optimism about China has combined with talk of possible OPEC+ production cuts to help lift oil prices.

U.S. crude futures rebounded $1.53 to $78.78 a barrel, after hitting a year low overnight, while Brent rose $1.83 to 85, $12.

European government bonds rose as investors shifted to riskier assets, with the yield on the benchmark 10-year German Bund falling nearly 9 basis points.

The dollar also fell 0.5% against a basket of currencies at 106.06, and lost 0.9% against the offshore yuan at 7.1830, erasing all gains made on Monday.

Previously the broadest MSCI index of Asia-Pacific stocks outside of Japan (.MIAPJ0000PUS) gained 1.8%.

Stocks of Chinese real estate companies leaps after the country’s securities regulator lifted a ban on equity refinancing for listed property companies.

It helped Chinese blue chips (.CSI300) jump nearly 3%, in the biggest one-day rally in a month and a marked reversal from Monday’s steep falls.

HIGHER LONGER

Richmond Federal Reserve Chairman Thomas Barkin has become the latest official to extinguish speculation the US central bank would reverse interest rates relatively quickly next year.

That heightened tensions ahead of Fed Chairman Jerome Powell’s speech on Wednesday, which is shaping up to be a major messaging event as markets yearn for a pivot on policy.

Analysts suspect they may be disappointed.

“We’re looking at it essentially confirming a slower pace of upside at the December meeting, which is almost fully priced in,” said NatWest Markets analyst Jan Nevruzi. “But we also think he will repeat that the Fed intends to remain in restrictive territory until next year.”

The Fed isn’t alone in being hawkish, with European Central Bank President Christine Lagarde Attention that eurozone inflation has not peaked and could go even higher.

The euro was up 0.4% at $1.0385, after hitting a five-month high of $1.0497 overnight.

Spain’s consumer prices in the year to November rose 6.8%, a slower pace than the 7.3% in the 12 months to October, preliminary data shown on Tuesday.

Spanish two-year bond yields fell 9.5 basis points to 2.310% according to the data.

Inflation figures from Germany are due later on Tuesday, ahead of Wednesday’s main euro zone report.

Reporting by Tom Wilson in London and Wayne Cole in Sydney; Editing by Bradley Perrett, Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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