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Chinese Stocks Soar as COVID Measures Ease, Global Markets Follow

Published 12/09/2022, 07:22 AM

Chinese stocks soared to a 3-month high after authorities alleviated coronavirus restrictions in major cities and ten other provincial capitals, boosting the investors’ confidence in the world’s second-largest economy. The benchmark Hang Seng Index jumped 2.3%, while the capitalization-weighted CSI 300 rose 1%.

World Stocks Tick Higher as China Eases Covid-19 Measures

Stocks in Hong Kong and China hit their highest level in three months after Chinese authorities announced a further easing of coronavirus measures across the country’s biggest cities and ten other provincial capitals. The reopening improved the investor sentiment around Chinese stocks, lifting Hang Seng Index and the blue-chip CSI 300 by 2.3% and 1%, respectively. Hopes that China’s economy will continue to reopen also provided a boost to global stocks.

However, the gains were limited as investors grew anxious ahead of the Federal Reserve’s policy meeting next week. US S&P futures rose 0.18%, while the STOXX 600 jumped 0.37%.The MSCI All-Country World Equity Index, which tracks large and mid-cap companies across 23 developed markets countries, is up 0.2%. Meanwhile, MSCI’s broadest index of stocks in the Asia-Pacific region rose 1.2%, heading for a three-month high it hit earlier this week. The UK FTSE 100 is up around 0.15%, while Japan’s Nikkei is over 1.1% in the green.

Investors Avoid Taking Big Positions Before the Fed Meeting

Premier of China Li Keqiang said Thursday the government’s U-turn in coronavirus policy would allow the economy to grow, brightening the mood among global investors. Keqiang’s remarks came just a day after China’s policymakers said they would focus more on stabilizing economic growth while optimizing Covid-19 measures.

Meanwhile, markets remain somewhat nervy ahead of the Fed’s policy meeting next week. The US central bank is expected to announce a 50 basis points interest rate increase, marking the first slower move after delivering four consecutive jumbo 75 bps hikes. Giles Coghlan, the chief currency analyst at HYCM, said,

“The market is very much focused on what the Fed is going to do on Wednesday, no one wants to take on any big positions.”

Hopes of a slowdown in the pace of rate hikes came after the latest consumer price index (CPI) print which showed that inflation in October eased to 7.7%. Elsewhere, inflation remains extremely high in the UK and the eurozone at 11.1 and 10.6%, respectively.

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