Stocks, commodities rise as China abandons quarantine rule

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 nearly 12% lost this year, as intense 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 hit a nine-week high on Tuesday, Germany’s two-year yield to trade the highest since 2008 at 2.489%, while Italian bond yields rose 11 basis points to 4.622%. .

European bond markets are yet to hit peak rates as the European Central Bank (ECB) lags behind the US Federal Reserve’s jumbo rate hike, according to Florian Ailbo, head of macro at Lombard Odier investment managers.

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 confident 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, appears to us to be the end of a cycle,” Ielpo said.

“With a total decline of around 20% this year, 2022 will require a minor miracle to be the weakest year for global equity markets since the financial crisis of 2008,” said Laura Mohdadi, an 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 concerns that winter storms across the United States could affect logistics and supply of 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 falling 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

Our Standards: Thomson Reuters Trust Principles.

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