- China and Hong Kong stocks rise after new reports of easing COVID restrictions
- Economic slowdown fears temper risk sentiment
- Gas prices rise as freezing weather blankets Europe
LONDON, Dec 8 (Reuters) – Global equities and oil prices battled their way out of a four-day slump on Thursday as deeply inverted bond yield curves and choppy currency markets underscored simmering concerns investors regarding economic stagnation next year.
Signs that China was easing its COVID restrictions had Hong Kong’s Hang Seng (.HSI) soar more than 3% overnight and the yuan to a 3-month high, but all was much more subdued in Europe.
A groggy STOXX 600 – which has recovered more than 15% since October – barely moved at first, with only oil and gas stocks (.SXEP) able to make any real headway as frigid weather in Europe sent prices soaring. natural gas prices by more than 5%.
Yields on benchmark government bonds also rose after hitting their lowest levels in months ahead of a series of data and key central bank meetings next week, including the US Federal Reserve. , the European Central Bank and the Bank of England.
“Everyone is waiting to see what comes out in terms of economic numbers and central bank meetings next week,” said Robert Alster, chief investment officer of Close Brothers Asset Management.
“There’s also China,” he added, referring to the country’s efforts to ease coronavirus curbs. “It’s really happening quite quickly now… So it could be quite beneficial for 2023 as long as it’s not fueling inflation anymore.”
Global bond yields, which move inversely to prices, have tumbled in recent weeks on signs that the prospect of recessions will slow the rise in interest rates.
Comments from ECB officials this week that euro zone inflation is likely near its peak have bolstered hopes that it will slow its hikes to 50 basis points from 75 basis points at its meeting on May 15. december. The Fed and BoE are expected to do the same at their respective meetings.
Still, many analysts believe the sharp fall in eurozone yields may have gone too far, given that inflation is still in double digits and the ECB is expected to raise rates to at least 2% this week. next.
The yield on 10-year German bonds, considered the benchmark borrowing cost for the bloc, rose 1 basis point on Thursday to 1.795%. It hit a two-month low of 1.788% on Wednesday, although it is still about 200 basis points higher for the year.
“We are still at a very high level of inflation in the eurozone,” said Camille de Courcel, head of European rates strategy at BNP Paribas Markets.
De Courcel expects a 50 basis point rate hike from the ECB next week, but there “is still a risk that it delivers a 75”.
The 10-year Treasury yield rose 5.4 basis points to 3.462%, while the 30-year Treasury yield rose 3.6 basis points to 3.450%.
The two-year US Treasury yield, which generally moves in line with interest rate expectations, rose 3.9 basis points to 4.295%.
BULLS IN CHINA SHOP
In the currency market, the US dollar wobbled as traders weighed the way forward from here. It initially dipped in Europe but recovered to bring the euro down to $1.0495 and the pound to $1.2170, down 0.3% on the day.
Monthly consumer inflation in the United States is also expected next week, a day before the Fed’s monetary policy meeting on December 14, and could be key in setting longer-term expectations for policy. monetary. (USCPNY=ECI)
“The US CPI is the only data release that looks really important to the broader direction of the dollar right now and until we have these central bank meetings and a key monthly US data release, not much is happening,” said RBC currency strategist Adam Cole. said.
Asia stocks were pushed much higher after Chinese and Hong Kong media reported that further relaxations of COVID rules were being considered.
Macau casino operators hit the jackpot (.CSICESG10) by jumping 9% and taking their gain this quarter to over 40%.
Hong Kong’s Hang Seng index climbed more than 3% while Chinese tech giants Alibaba and Meituan (3690.HK) jumped 6% each.
“While the journey may be bumpy over the next few weeks, China is poised to transition from COVID in one to two quarters,” said Wenli Zheng, portfolio manager of China Evolution Equity Strategy at T. Rowe Price, adding that Chinese equities could be the bright spot in 2023.
Among the main commodities, oil regained its place after a four-day decline that had propelled it into the red for the year.
Brent crude rose 29 cents, or 0.4%, to $77.46 a barrel at 0905 GMT, while U.S. West Texas Intermediate (WTI) crude gained 73 cents, or 1%, to 72.74 $.
In early March, shortly after Russia invaded Ukraine, Brent was near $140 a barrel, up nearly 80% for the year at the time.
Traders attributed Thursday’s modest increase to China’s COVID measures and the fact that at least 20 tankers are now facing delays crossing to the Mediterranean from Russia’s Black Sea ports following new sanctions. Europeans.
Additional reporting by Harry Robertson; Editing by Arun Koyyur
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