International stocks rose on Monday, extending a rally that pared some of this year’s losses, as U.S. markets were closed for the Memorial Day holiday.
The Stoxx Europe 600 gained 0.6%, led by stocks of technology and luxury goods companies. Germany’s DAX gained 0.8% and London’s FTSE 100 edged up 0.2%.
Global markets were boosted by the imminent easing of some Covid-19 curbs in China. Shanghai Vice Mayor Wu Qing said over the weekend authorities would ease the conditions under which businesses could return to work this week, and the city government outlined a 50-point plan to speed up recovery. economic. The measures include tax cuts for businesses and subsidies for the purchase of electric vehicles, the official Xinhua news agency said.
S&P 500 futures gained 0.6% at noon ET. The US stock market is due to reopen on Tuesday, as is the Treasury market. Yields on government bonds retreated from their 2022 highs heading into Friday’s close, helping lift stocks after a week of beatings. The S&P 500 ended a seven-week losing streak on Friday and posted its biggest weekly gain since November.
Still, some fund managers warn that the rally in stock and bond prices could be a short-lived blow in a longer-term retreat. They say most of the factors that contributed to this year’s losses — the war in Ukraine, higher interest rates set by the Federal Reserve and a slowing economy — are still in place.
“We’re about to see a rally in the bear market, or we’re there,” said Daniel Egger, chief investment officer at St. Gotthard Fund Management.
Mr Egger said yields would begin to rise again and corporate earnings forecasts were too high, while profit margins came under pressure from high commodity prices. “That doesn’t bode well for stocks,” he said.
On the economic front, the data showed an acceleration of inflation in the main European economies. Germany’s annual inflation rate hit 8.7% this month, according to preliminary figures, the fastest pace since 1973. In Spain, consumer prices rose 8.5% on the year, against 8.3% in April.
Shares of European luxury goods companies that have tapped into Chinese demand have benefited from the prospect of lighter shutdowns. Hermès International grew by 3.9% and Compagnie Financière Richemont grew by 2.9%. L’Oreal,
the French personal care company, gained 2.1% and LVMH Moët Hennessy Louis Vuitton gained 2.6%.
In commodities markets, benchmark Brent crude futures rose 1.2% to $116.90 a barrel and hit their highest level in more than two months. Leaders of European Union members are due to meet on Monday and Tuesday, after weekend diplomats failed to reach an agreement on sanctions that would limit imports of Russian oil.
In Asia, the Shanghai Composite Index gained 0.6% and the Hong Kong Hang Seng jumped 2.1%.
In China, companies that serve Chinese consumers have seen some of the biggest advances. Hot-pot restaurant chain Haidilao International Holding Ltd.
brewer China Resources Beer (Holdings) Co. and sportswear company Li Ning Co. Ltd.
jumped between 8.2% and 11% in Hong Kong.
Chinese internet stocks built on a rally from late last week, with the Hang Seng Tech index rising 3.9%. Food delivery giant Meituan jumped 6.8%. Chinese e-commerce platform Pinduoduo Inc.
whose shares trade in the United States, reported better-than-expected quarterly earnings and revenue on Friday, after equally strong results from Alibaba Group Holding Ltd..
and Baidu Inc..
Investors are hoping China is past the worst of its Covid-19 wave in terms of lockdown severity and number of cases, said Michael Metcalfe, head of macro strategy at State Street Global Markets. It would dampen one of the forces pushing the global economy into a period of low growth and high inflation, he said.
Still, Metcalfe said, inflation remains high in Europe and the United States, keeping pressure on central banks to raise interest rates. “There is nothing we see in the current inflation trend that gives us confidence,” he said.
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