© Reuters. FILE PHOTO: A man walks past a screen displaying a graph showing recent Nikkei share average movements outside a brokerage in Tokyo, Japan, December 30, 2020. REUTERS/Issei Kato/File Photo
By Herbert Lash and Huw Jones
NEW YORK/LONDON (Reuters) – Wall Street stocks rose on Monday, tracking gains in Asia and Europe on signs of an easing of restrictions by China, and as investors took expected interest rate hikes in coming days in their stride despite crude oil hitting $120 a barrel.
The dollar was little changed against the euro ahead of a European Central Bank policy meeting on Thursday but was weaker against the commodity currencies – the Canadian, Australian and New Zealand dollars – as risk appetite increased.
A Wall Street Journal report that Chinese regulators are concluding probes into ride-hailing giant Didi Global Inc and the easing of domestic COVID curbs have bolstered sentiment, said Marc Chandler, chief market strategist at Bannockburn Global Forex.
“You’ve got the world’s second-largest economy continuing to open up,” he said. “It looks like Didi may be available again at the mobile app stores and Beijing opened up public transportation.”
Didi shares surged 52.2% on the Journal report, and the news helped Hong Kong’s tech index close 4.6% higher..
Sentiment also was aided by comments from U.S. Commerce Secretary Gina Raimondo that President Joe Biden has asked his team to look at the option of lifting some tariffs on Chinese imports.
People are no longer talking that the Federal Reserve might hike interest rates by 75 basis points and have backtracked a bit from a 50 basis point hike in September, which also has boosted sentiment, Chandler said.
The major U.S. stock indices were up some 1% or more, as were the big country indices for Britain, Germany, France, Italy and Spain.
The pan-European index rose 1.22% and MSCI’s gauge of stocks across the globe gained 1.15%.
On Wall Street, the rose 0.94%, the gained 1.36% and the added 1.73%. Growth shares rose 1.8%, or more than double the 0.9% gain in value ones.
U.S. Treasury yields rose as the market prepared for the sale of $96 billion in debt this week and ahead of data on Friday expected to show U.S. inflation is still running hot.
The consumer price index (CPI) is expected to have gained 0.7% last month, compared with 0.3% in April, with annual inflation unchanged at 8.3%, according to the median estimate of economists polled by Reuters.
Michael Hewson, chief markets analyst at CMC Markets, said there was still doubt as to whether inflation has peaked.
“We are in a bit in a no-man’s land at the moment with respect to peak inflation, and also China reopening and the possible tailwinds that might bring. Oil prices are still a headwind and so it’s difficult to gain any direction,” he said.
The three U.S. debt auctions this week are likely to push yields higher as banks and investors prepare to absorb the issuance.
The yield on was up 6.3 basis points at 3.018%.
At the ECB meeting on Thursday, President Christine Lagarde is considered certain to confirm an end to bond-buying this month and a first rate increase in July, though the jury is out on whether that will be 25 or 50 bps, as some investment banks ramped up their expectations.
Money markets are priced for 130 bps of rate increases by year-end, with a 50 bps move at a single meeting fully priced in by October.
A high number would only add to expectations of aggressive tightening by the Fed next week, with markets already priced for half-point increases in June and July and almost 200 basis points (bps) by the end of the year.
The rose 0.02%, with the euro down 0.01% to $1.0718. The yen weakened 0.35% to 131.34 per dollar.
Oil prices earlier rose after Saudi Arabia raised prices sharply for its crude sales in July, an indicator of how tight supply is even after OPEC+ agreed to accelerate output increases over the next two months. [O/R]
fell 0.18% to $118.66 per barrel and was at $119.65, down 0.06% on the day.
GRAPHIC: US CPI (https://fingfx.thomsonreuters.com/gfx/mkt/lgvdweerbpo/Pasted%20image%201654244362516.png)
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