LONDON, Dec 27 (Reuters) – Stock markets rose on Tuesday after China said it would drop its COVID-19 quarantine rule for incoming travelers, a major step toward reopening its borders.
MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) rose 0.6 percent, outperforming an index of global shares, which rose 0.2 percent. Bluechip China gained 1%.
The pan-European STOXX 600 index (.STOXX) rose 0.5%, following the rally in Asia, a small gain from the nearly 12% it has lost this year as aggressive tightening of monetary policy by banks central has hit European stocks hard.
U.S. stock futures, the S&P 500 e-minis, rose 0.7 percent, indicating the market will rise as traders return to their terminals on Tuesday after the Christmas break.
Markets in some regions, including London, Dublin, Hong Kong and Australia, remain closed.
Bonds fell as yields, which move inversely to price, hit nine-week highs on Tuesday, with two-year German yields at their highest since 2008 to trade around 2.489 %, while Italian bond yields rose 11 basis points to 4.622%. .
European bond markets have yet to hit peak rates, with the European Central Bank (ECB) lagging behind the US Federal Reserve’s jumbo rate hikes, according to Florian Ielpo, head of macro at Lombard Odier Investment Managers.
The overall picture looks bullish, he said, pointing to credit spread prices and the broader derivatives markets. The (.VIX), often seen as an indicator of risk aversion, has fallen 35% since early October as investors have grown more confident that inflation has peaked.
“What we’re seeing today, with a rebound in China and bullish commodity futures prices, is what happened in the summer of 2008, and it looks like an end-of-cycle moment to us,” Ielpo said.
“With a total decline of around 20% this year, it will take a minor miracle for 2022 not to be the weakest year for global stock markets since the 2008 financial crisis,” said Lara Mohtadi, an analyst at SEB Bank.
“Last week we also saw the biggest rise in US 10-year yields since April and ended trading on Friday at 3.75%,” he said.
The yield on two-year Japanese government bonds (JGB) jumped to their highest in more than seven-and-a-half years on Tuesday as an auction of notes with the same maturity received relatively weak demand.
The dollar fell 0.1% against a basket of major currencies. The euro rose about 0.25% against the dollar to $1.066.
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Brent crude rose 0.9% to $84.68 a barrel, while U.S. West Texas Intermediate crude also rose 0.8% to $80.22 a barrel.
US Treasuries will resume trading on Tuesday after a holiday on Monday. The benchmark 10-year yield rose the most last week since early April, finishing around 3.75%.
The two-year JGB yield rose to 0.040%, its highest since March 2015, before falling to 0.030%.
Analysts at Citi pointed to upside risk on Friday in a report that the Fed’s policy rate could reach 5.25% to 5.50% by the end of 2023.
Their forecast was largely based on expectations that the labor market would continue to add jobs in the first few months of 2023, even though it was already very tight, adding to upward pressure on wages and prices of non-housing services, so it would require the Fed to raise rates further. quickly
Reporting by Nell Mackenzie; Additional reporting by Xie Yu and Ankur Banerjee; Editing by Simon Cameron-Moore
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