Shares, oil rise as sentiment towards China brightens

© Reuters. FILE PHOTO: An electronic board shows Shanghai and Shenzhen stock indexes, at the Lujiazui financial district in Shanghai, China October 25, 2022. REUTERS/Aly Song/File Photo

By Amanda Cooper

LONDON (Reuters) - Global shares rose on Monday, lifted by a growing expectations that the Federal Reserve will not raise interest rates again, and by hopes that China's steady drip feed of policy stimulus might stabilise the economy.

A holiday in the United States kept a lid on activity ahead of key readings on U.S. services and Chinese trade and inflation later this week.

More policy action is also expected from Beijing, including relaxing restrictions on home buying.

There was relief that embattled property developer Country Garden won approval from its creditors to extend payments for an onshore private bond.

"Taken alongside other measures announced in prior weeks, it does appear that momentum is building for policy changes in China that could put a floor under sentiment and lift consumption," Lazard (NYSE:LAZ) chief market strategist Ron Temple said.

"I continue to worry that there is not a sufficient sense of urgency among Chinese policy makers, but moves like those taken this week, combined with stabilization/improvement in PMI data could signal an upcoming turn in investor psychology," he said.

The MSCI All-World index, which last week staged its strongest weekly rally since mid-July, was up 0.2%, while the dollar was around 0.16% lower on the day.

"Perhaps there's some carryover from last week - I'm still surprised at the lack of uplift from the jobs report - or the prospect of a stimulus-induced boost to China's economy," OANDA strategist Craig Erlam said.

"Or maybe there's nothing much at all behind the small gains in Europe and we're just getting back into the swing of post-summer break trading," he said.

Investor sentiment in the tech sector will be tested this week by the initial public offering for chip giant Arm Holdings, which is aiming for a price in the range of $47 to $51, valuing the company between $50 billion and $54 billion.

S&P 500 futures and Nasdaq futures rose between 0.2%-0.3%, while European stocks neared one-month highs. The STOXX 600 was up 0.3%, led by gains in tech stocks, such as Dutch semiconductor manufacturer ASML and drugmaker Novo Nordisk (NYSE:NVO), which last week briefly overtook French luxury group LVMH as Europe's most valuable company.

PAYROLLS BOOST

Stocks rose on Friday after August's U.S. payrolls report firmed expectations for an end to rate hikes.

While the headline jobs number topped forecasts, downward revisions to the previous two months and a dip in wage growth pointed to a loosening in the labour market.

The jobless rate also jumped as more people went looking for work, leaving the vacancies to unemployed ratio at its lowest since September, 2021.

Futures now imply a 93% chance of rates staying unchanged this month and a 67% probability that the entire tightening cycle is over.

At least seven Fed officials are due to speak this week ahead of the next policy meeting on Sept. 19-20.

The head of the European Central Bank, Christine Lagarde, on Monday said it was critical for policymakers to keep inflation expectations firmly anchored. The market is now leaning against a hike at its September meeting after a run of soft data.

The relative outperformance of the U.S. economy underpinned the dollar at 146.33 yen, not far from its recent 10-month peak of 147.37. The euro rose 0.3% to $1.0803, still within sight of its recent low at $1.0765.

In commodities, oil traded near seven-month highs on tightening supply as Saudi Arabia was widely expected to extend voluntary oil production cuts into October.

Brent crude futures rose 0.2% to $88.75 a barrel, as did U.S. futures, reaching $85.73.