© Reuters. FILE PHOTO: A man wearing a protective mask, in the middle of an outbreak of coronavirus (COVID-19), walks past an electronic board showing graphs (top) of the Nikkei index outside a brokerage house in Tokyo, Japan, March 10, 2022. REUTERS / Kim Kyung-Hoon
By Samuel Indyk
LONDON (Reuters) – Global equities were higher on Tuesday as oil prices strengthened after China̵[ads1]7;s decision to ease some quarantine requirements for international arrivals that raised hopes for stronger growth and a revival in demand for raw materials.
China has cut the quarantine period for incoming travelers by half in a significant relief of one of the world’s strictest COVID-19 curbs, which has deterred cross-border travel and resulted in international flights running at just 2% of pre-pandemic levels.
Asian equities rose after the announcement, and European equities were well in the green, sending MSCI’s global equities benchmark into positive territory and heading for its fourth consecutive daily rise.
China’s strict zero-COVID regulations have been a strain on activity in the world’s second economy, but easing travel restrictions and reopening major cities from shutdowns are raising optimism that growth may return to normal.
“This is a good step forward,” said Hani Redha, portfolio manager for several assets in PineBridge Investments.
“It’s not enough to lead to a very robust improvement, but it’s definitely going to be positive gradually.”
MSCI’s broadest index of Asia-Pacific stocks rose 0.4%, while Hong Kong’s previous loss reversed to 0.9% and China’s CSI 300 index closed up more than 1%. China’s tourism shares rose above 5.5%.
The pan-European index rose 0.7% at a two-week high, strengthened by oil and gas and mining stocks as commodity prices benefit from hopes of resurgent demand from top metal consumer China.
US stock index futures were higher by around 0.5%, but the outlook for equities in developed markets remains challenging as central banks try to balance stubbornly high inflation with declining growth.
“The stock markets will not be out of the woods until the central banks change their rhetoric to a less hawkish stance,” said Salman Baig, portfolio manager, cross asset solutions, at Unigestion
“Unfortunately for many investors, such a pivot is unlikely to happen until after the economy has slowed down sufficiently to bring inflation on a sustainable downward path.”
The European Central Bank’s forum for central banking in Sintra continued on Tuesday with ECB President Christine Lagarde confirming plans to start raising interest rates from next month.
Lagarde said the ECB would move gradually as it began to raise interest rates, but with the opportunity to act decisively on any weakening of inflation in the medium term, especially if there are signs of a loosening of inflation expectations.
Eurozone government bond yields were higher after Lagarde’s comments, as investors remained focused on inflation risk and money tightening, with Germany’s 10-year yield, the benchmark index for the bloc, up 11 basis points to 1.658%.
The euro did not change much against the dollar after Lagarde’s initial comments, while China’s rose 0.1% after Beijing’s measures to ease travel restrictions.
which measures the dollar against a basket of six currencies, was little changed at 103.99.
Oil prices rose after China eased quarantine rules, already focusing on tight supply when G7 leaders agreed to study price caps on imports of Russian oil and gas.
rose 1.9% to $ 111.65 a barrel. jumped 2.3% to $ 117.73 per barrel.
“A seam of dense supply news strengthened the (oil) market,” said analysts at the Commonwealth Bank of Australia (OTC :). “Political unrest could limit supply from a couple of second-tier producers, Ecuador and Libya. And then there are the G7’s proposed price caps on Russian oil.”
Gold was 0.1% higher with the spot price trading at $ 1,824 per ounce.
rose 1.4%, trading at $ 20,989 after falling as low as $ 17,588.88 earlier this month.