European shares rise on hopes of ‘soft landing’, China reopens

LONDON, Jan 9 (Reuters) – European stock indexes rose in early trade on Monday as investors lowered their expectations for a U.S. Federal Reserve interest rate hike and China’s reopening of borders.

U.S. jobs data on Friday showed an improvement in labor numbers and eased wage growth, interpreted by investors as a sign that the Fed may be less hawkish. Global stocks rose and the dollar fell.

Upbeat market momentum continued on Monday, with Asian shares rising after China reopened its borders, raising the outlook for the global economy. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) It rose to the highest level in more than six months.

The MSCI world equity index was up 0.5% at 0811 GMT, the most since mid-December. (.MIWD00000PUS).

Europe’s STOXX 600 was up 0.5%, and near a one-month high (.STOXX) And London’s FTSE 100 rose 0.2%, paring the previous week’s gain to its highest since 2019. (.FTSE).

“Wage pressures are easing very fast and people are now whispering the words ‘soft landing’ more loudly,” said Honey Redha, global multi-asset portfolio manager at Bainbridge.

A soft landing is the ideal Federal Reserve policy goal after raising interest rates, a scenario in which inflation falls but not enough job losses to trigger a recession.

Redha said there was “more enthusiasm” in the market’s reaction to the US jobs data and that more wage data would be needed.

Money markets were pricing in a 25% chance of a half-point hike in February, up from 50% a month earlier. Investors will look to Thursday’s CPI data for more clues about the central bank’s next move.

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The U.S. dollar index fell about 0.1%, after falling 1.2% on Friday to its lowest level in seven months.

The euro rose 0.3% to around $1.0673, up from 1.2% on Friday.

China’s offshore yuan hit a five-month high of 6.7885 against the US dollar, while the Australian dollar — often seen as a proxy for risk appetite — rose 0.8% to $0.6928 on the day. session.

“I think the pace of (China’s) reopening has been much faster than anyone expected, and as a result we will see this flow to fundamentals for months to come,” PineBridge’s Redha said. PineBridge had it rough in November. It raised its China stock exposure on expectations that China’s Covid rules will be eased.

“China is going faster, whereas everywhere else you’ll see growth slowing, and that’s going to benefit Asia as a region and markets like Australia, which are going to benefit from the impact on goods as China reopens,” Redha added.

Oil prices rose more than 2% as China’s reopening overshadowed worries about a global slowdown.

In bond markets, European government bonds rose in a reversal after sharp falls in previous weeks. Germany’s benchmark 10-year government bond rose 6 basis points to 2.268%.

The 10-year US Treasury yield rose 4 bps to 3.606, recovering after a sharp drop on Friday.

Earnings season begins this week with major U.S. banks as analysts fear no year-over-year growth in total earnings.

Report by Elizabeth Howcroft; Editing by Susan Fenton

Our Standards: Thomson Reuters Trust Principles.

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