Global stock markets soar on hints China will ease Covid-19 thresholds and lighten positive US jobs data

Global stock markets rallied Friday to end the week higher, on hopes that China will begin easing severe Covid-19 restrictions and optimism that the Federal Reserve will soften its aggressive rate hikes after optimistic US jobs data.

China — the world’s second-largest economy with some of the strictest zero-covid policies, including widespread lockdowns, quarantines and testing — is said to be considering easing these rules, according to unverified reports circulating on social media.

But even without confirmation, mainland and Hong Kong stocks rose.

Adding to the optimism were Beijing’s plans to end a regulation that would fine airlines for bringing virus cases into the country, which was first reported by Bloomberg, and German Chancellor Olaf Scholz said that China will make BioNTech’s vaccine available to foreign residents, which would be the first approval of the mRNA vaccine there.

However, a spokesman for the China National Health Commission dashed these hopes on Saturday, stressing in a press conference that the country will continue with its strict measures.

“At present, China is still facing the dual threat of imported infections and the spread of domestic outbreaks,” Mi Feng said. “The disease control situation is as grim and complex as ever. We must continue to put people and lives first.”

Hong Kong’s Hang Seng Index rose 5.4 percent, its best weekly showing since 2015, while the Shanghai Composite rose 2.4 percent.

Technology giants in China including conglomerate Alibaba Group, internet wholesaler Baidu and online retailer all rose by at least 7 percent, while electric vehicle manufacturers also rose.

However, the Nikkei 225 in Tokyo bucked the trend and lost 1.7 percent as it tried to make up for Thursday’s losses after a holiday on Wednesday.

Meanwhile, US nonfarm payrolls rose 261,000 in October, well ahead of a projection of 193,000 from a Bloomberg survey of economists, the Labor Department said Friday. It also revised September data to show that 315,000 jobs have been added to the economy instead of the previously reported 263,000.

The Fed on Wednesday raised its interest rates by 75 basis points for the fourth consecutive time, as it continues a persistently high inflation rate, but indicated it could take a less aggressive stance.

“This economic lecture [jobs data] draws the most attention from investors and traders as economic data sets the trading tone and influences it for the rest of the month,” said Naeem Aslam, chief market analyst at Avatrade, in a note.

“As always, the Fed will be watching this data very closely, which will most likely affect their monetary policy.”

At the close on Wall Street, the Dow Jones Industrial Average rose 1.3 percent, the S&P 500 climbed 1.4 percent and the tech-heavy Nasdaq Composite added 1.3 percent.

This economic lecture [jobs data] draws the most attention from investors and traders as economic data sets the trading tone and influences it for the rest of the month

Naeem Aslam, Chief Market Analyst at Avatrade

In Europe, London’s FTSE 100 closed 2 percent higher after the pound recovered against the dollar, after the Bank of England (BoE) said the UK economy is at risk of a two-year recession, which it said could have already begun. .

The BoE raised its key interest rate by 75 basis points to 3 percent on Wednesday, the largest increase in more than three decades, as it seeks to contain high inflation. That caused a 2 percent drop in the British currency.

Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, questioned the BoE’s reasons for the rate hike, arguing that the “useless 75 basis point gain” has further weakened the pound.

“Sterling dove anyway and will dive deeper. The divergence between the Fed, which is looking for smaller rate hikes but higher final rates, and the BoE, which doesn’t want to get more aggressive than this, is likely to weigh on the pound-dollar We could see the pair’s parity tested again in the coming weeks,” he said.

Elsewhere in Europe, Frankfurt’s DAX climbed 2.5 percent, while Paris’ CAC 40 rose 2.8 percent.

In commodities, oil prices rose to their highest level in two months after news of China and the Group of Seven Advanced Economies agreeing to impose a price cap on Russian crude. Brent closed 4.12 percent higher at $98.57, while West Texas Intermediate closed 5.04 percent higher at $92.61 a barrel.

Gold, meanwhile, posted its best performance in a month, rising to 3.4 percent before hitting 2.8 percent at $1,676.60 an ounce to close the week up 1.9 percent.

Global demand for gold rose 28 percent year-on-year to 1,181 tons in the third quarter of 2022, as investors flocked to the precious metal’s appeal, the World Gold Council said in a report this week.

Updated: November 05, 2022, 10:12 AM

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