European shares rise on hopes of ‘soft landing’, China reopens

LONDON, Jan 9 (Reuters) – European stock indexes rose in early trade on Monday, boosted by easing investor expectations of a rate hike by the U.S. Federal Reserve and optimism over China’s reopening of borders.

US jobs data on Friday, which showed a jump in the labor force and easing wage growth was interpreted by investors as an indication that the Fed may be less hawkish. Global shares gathered together and the dollar fell.

The market’s upbeat momentum continued on Monday, with Asian shares higher after China reopened its doors borders, improving the outlook for the global economy. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose to its highest in more than six months.

At 0811 GMT, the MSCI World Equity Index was up 0.5%, near its highest since mid-December (.MIWD00000PUS).

Europe’s STOXX 600 was 0.5% higher, also near a one-month high (.STOXX) and London’s FTSE 100 rose 0.2%, extending the previous week’s gains to its highest since 2019. (.FTSE).

“The market is reading that wage pressures are easing quite quickly and seeing that as a positive and potentially people whispering the words ‘soft landing’ louder now,” said Hani Reda, global multi-asset portfolio manager at PineBridge.

A soft landing is the ideal goal of Federal Reserve policy after a rate hike, a situation in which inflation slows but there are not enough job losses to trigger a recession.

Redha said there was “overexcitement” in the market’s reaction to the US jobs data and that more wage data would be needed.

Money markets were pricing in a 25% chance of a half-point gain in February, down from about 50% a month ago. Investors will look to Thursday’s CPI data for further clues about the Fed’s next move.

The U.S. dollar index was down about 0.1 percent, still near a seven-month low, after falling 1.2 percent on Friday.

The euro rose 0.3 percent to around $1.0673, down from a 1.2 percent jump on Friday.

China’s offshore yuan neared a five-month high against the US dollar at 6.7885, while the Australian dollar – often seen as a proxy for risk appetite – rose 0.8% on the day to $0.6928, after having hit its highest since late August earlier in the session.

“The speed of (China’s) reopening is much faster, I think, than anyone expected, and as a result we will see this flow to the fundamentals over the next few months,” PineBridge’s Redha said. said in November it sharply increased its exposure to Chinese stocks on expectations of an easing of China’s COVID rules.

“China will accelerate while everywhere else you will see growth decelerate and that will be quite positive for Asia as a region and markets like Australia that will benefit from the impact on commodities when China reopens,” Reda added.

Oil prices rose more than 2% as China’s reopening overshadowed fears of a global recession.

In bond markets, European government bond yields rose, reversing sharp declines in previous weeks. Germany’s benchmark 10-year government bond rose 6 basis points to 2.268%.

The U.S. 10-year Treasury yield rose 4 basis points to 3.606, also recovering from a sharp drop on Friday.

Earnings season kicks off this week with major U.S. banks, with analysts fearing no annual growth in overall earnings at all.

Reporting by Elizabeth Howcroft; Editing by Susan Fenton

Our standards: Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the ‘Web3’ money movement.

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