The dollar was little changed against the euro ahead of a European Central Bank policy meeting on Thursday, but was weaker against the commodity currencies – the Canadian, Australian and New Zealand dollars – as appetite for the risk increased.
A Wall Bourse Journal report that Chinese regulators are concluding investigations into taxi ride giant Didi Global Inc and the easing of national COVID restrictions has bolstered sentiment, said Marc Chandler, chief market strategist at Bannockburn. GlobalForex.
“You have the second largest economy in the world which continues to open up,” he said. “Looks like Didi might be available on mobile app stores again and Beijing has opened public transport.”
Shares of Didi jumped 52.2% following the Journal’s report, and the news helped Hong Kong’s Hang Seng technology index close up 4.6%.
Sentiment was also helped by comments from US Commerce Secretary Gina Raimondo that President Joe Biden has asked his team to consider the option of lifting some tariffs on Chinese imports.
People are no longer talking about the Federal Reserve possibly raising interest rates by 75bps and have backtracked a bit from a 50bp increase in September, which has also boosted sentiment, Chandler said.
Major US stock indexes were up around 1% or more, as were major national indexes in Britain, Germany, France, Italy and Spain.
The pan-European STOXX 600 index rose 1.22% and the MSCI Global Equity Index 1.15%.
On the Wall Exchange, the Dow Jones Industrial Average index increased by 0.94%, the S&P 500 by 1.36% and the Nasdaq Composite by 1.73%. Growth stocks rose 1.8%, more than double the 0.9% gain of value stocks.
US Treasury yields rose as the market braced for the sale of $96 billion in debt this week and ahead of Friday’s data which is expected to show US inflation still strong.
The consumer price index (CPI) is expected to have gained 0.7% last month, from 0.3% in April, with annual inflation remaining unchanged at 8.3%, according to the median estimate of economists polled by Reuters .
Michael Hewson, chief market analyst at CMC Markets, said doubt remains over whether inflation has peaked.
“We’re in a bit of a no man’s land right now in terms of peak inflation, and also the reopening of China and the possible tailwinds that might bring. Oil prices are still a headwind and so it’s hard to take any direction,” he said.
The three US debt auctions this week are likely to push yields higher as banks and investors prepare to absorb the issues.
The yield on 10-year Treasury bonds was up 6.3 basis points to 3.018%.
At Thursday’s ECB meeting, it is considered certain that President Christine Lagarde will confirm an end to bond buying this month and an initial rate hike in July, although the jury is out on whether this increase will be 25 or 50 basis points, as some investment banks have raised their expectations.
Currency markets are pricing in a 130 basis point rate hike by the end of the year, with a 50 basis point hike in just one meeting by October.
A strong figure would only bolster expectations of aggressive Fed tightening next week, with markets already forecasting increases of half a point in June and July and nearly 200 basis points (bps) in here the end of the year.
The Dollar Index rose 0.02% as the euro fell 0.01% to $1.0718. The yen weakened 0.35% to 131.34 per dollar.
Oil prices rose earlier after Saudi Arabia sharply hiked prices on its crude sales in July, an indicator of supply tightness even after OPEC+ agreed to accelerate oil price increases. production over the next two months. [O/R]
US crude was down 0.18% at $118.66 a barrel and Brent was at $119.65, down 0.06% on the day.
CHART: US CPI (
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