News that authorities in Shanghai have rolled back numerous restrictions on businesses returning to work from Wednesday has helped lighten the mood, easing the city’s lockdown that began two months ago.
The benchmark MSCI index for global equities rose 0.6% to its highest level in more than four weeks at 0745 GMT, thanks to a positive open in Europe and strong gains in Asia overnight. The index is up 0.4% since the beginning of the month.
The pan-European benchmark STOXX 600 gained 0.7%, while Japan’s Nikkei rose 2.2% and Chinese blue chips rose 0.7%.
Although the Wall Bourse was closed for Memorial Day, US futures contracts were being traded. S&P 500 e-minis rose 0.9%, after rising 6.6% last week in their best year-to-date run, while Nasdaq e-minis added 1. 3%.
Investors seized on hints that the Federal Reserve, once it makes aggressive hikes over the next two months, may then slow its tightening.
“Talks of a pause in the Fed’s rate hike cycle are doing wonders for everything from equities to bonds and – sadly – commodities too,” said AFS Amsterdam Group analyst Arne Petimezas.
“Over the past few weeks, about 50 basis points have been stripped from Fed terminal rate pricing. annual Jackson Hole in August,” he added in a statement.
The likelihood of a less hawkish Fed was enough to send Treasury bonds rebounding, with 10-year bond yields hovering just above a six-week low of 2.743%. This is down from the peak of 3.203% reached on May 9.
The more stable mood in the market saw the safe-haven dollar and yen retreat, while the euro was boosted by hawkish comments from European Central Bank (ECB) officials announcing a rate hike. ds July.
“US economic data appears to be slowing, ECB officials are debating an even faster initial rate hike, and initial rate spreads have started to shift in favor of the euro,” noted Goldman analyst Zach Pandl. Sachs.
“A sharp slowdown in the US economy – if not accompanied by similar weakness in Europe – could lead to a significant rebound in the euro, although the reverse is also true if US data holds. better than expected,” Pandl added. “We see downside risks to US growth, and have recommended USD/JPY puts to express that view.”
This underscores the importance of key US data this week, which includes the ISM manufacturing survey on Wednesday and the May payroll report on Friday.
A solid increase of 320,000 jobs is expected, although this is down from April, with an unemployment rate of 3.5%.
The euro hit its highest level in five weeks and was up 0.2% at $1.0750, after rising 1.6% last week. The Dollar Index fell to a five-week low of 101.38 and was down 0.2% at 101.50, after losing 1.3% last week.
China’s offshore yuan rose 0.85% after hitting a one-week high of 6.6548 per dollar.
The weaker dollar helped gold pull back from its recent lows, pushing the metal up 0.5% to $1,862 an ounce.
Oil prices have been supported by expectations of stronger demand as the US driving season kicks off, and European Union nations negotiate whether to impose an outright ban. Russian crude oil.
The EU failed to agree a Russian oil embargo on Sunday, but diplomats will still try to make progress ahead of a summit on Monday-Tuesday.
Brent rose 0.4% to $119.90 a barrel, while US crude gained 0.6% to $115.72 a barrel.