European and Asian stocks rose on Tuesday, extending gains from the previous session, as traders balanced signs of slowing global growth with news that China was easing Covid quarantine restrictions.
The regional European Stoxx 600 added 0.5 per cent in early dealings, while the FTSE 100 rose 0.8 per cent.
China on Tuesday announced that mainland quarantine requirements for all arrivals would be cut from 21 to 10 days, with visitors to the mainland from Hong Kong only required to quarantine for seven days.
Hong Kong’s Hang Seng index swung from a loss to be up 0.5 per cent following the announcement, while China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks rallied late in the afternoon session to close up 1 per cent.
That partial easing of Covid restrictions in the world’s second-largest economy came after a flurry of disappointing economic data from across the globe, with weaker-than-expected surveys of business activity last week. A report on Tuesday found that German consumer sentiment, based on economic and income expectations, had dropped to a new record-low — albeit July’s projection was broadly in line with consensus forecasts.
A French consumer survey for June also showed a further decline, slightly below economists’ predictions.
The European Central Bank signalled earlier this month that it would raise interest rates for the first time in more than a decade at its July meeting, and could go further in September, as it moves to curb inflation which hit 8.1 per cent in the bloc in May.
Christine Lagarde, president of the ECB, was due to give a speech on Tuesday morning from Sintra, Portugal, where European central bankers are holding their annual forum.
Analysts at Scandinavian banking group SEB wrote: “Household consumption is . . . the main channel for weaker growth in 2022 and 2023. Rising interest costs have and will add to an already challenging situation.”
Later in the session, consumer data will give clues about how scorching US inflation has hit American consumer sentiment. In recent days, markets have lowered their expectations of how far the Federal Reserve will raise borrowing costs, in anticipation of higher rates compounding a possible recession.
The moves in equity markets on Tuesday came three days before the quarter-end, a time when fund managers typically rebalance their portfolios — a process that can contribute to asset price swings.
Futures contracts tracking Wall Street’s S&P 500 and the Nasdaq 100 were up 0.2 per cent on Tuesday morning, after the blue-chip S&P 500 lost 0.3 per cent on Monday. The tech-heavy Nasdaq Composite, which has suffered from its reliance on growth companies impacted by rising interest rates, dropped 0.7 per cent.
In bond markets, the yield on the 10-year German Bund, a benchmark for eurozone borrowing costs, rose by 0.07 percentage points to 1.61 per cent, reflecting a drop in the debt instrument’s price. The yield on the 10-year US Treasury note edged 0.02 percentage points higher to 3.22 per cent.
In commodities markets, Brent crude continued to rise in price after the G7 indicated it was ready to explore caps on energy prices to limit Russian revenues. The international oil benchmark added 1.1 per cent to $116.37 a barrel.
