NEWS European markets remain cautious after China eases anti-epidemic measures

European markets remain cautious after China eases anti-epidemic measures

LONDON, Dec 5 (Reuters) – European shares opened slightly lower on Monday, with little support for China’s easing of domestic anti-epidemic restrictions, after U.S. jobs data on Friday stoked concerns about persistent inflation and weighed on sentiment .

Asian shares were buoyed early on Monday on hopes that steps by China to ease its zero-COVID policy will support global growth and boost demand for commodities.

More Chinese cities announced Sunday the easing of COVID-19 measures following unprecedented protests against restrictions over the weekend. The news lifted Chinese stocks and pushed the yuan above 7 per dollar. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.7 percent (.MIAPJ0000PUS).

But the impact on European markets was limited as investors remained cautious about the extent of reopening, with the MSCI World Shares index of shares in 47 countries up just 0.3% (.MIWD00000PUS) on the day.

Europe’s Stoxx 600 fell 0.1% (.STOXX) and Germany’s DAX fell 0.4% (.GDAXI), but London’s FTSE 100 rose 0.2% (.FTSE).

“I don’t think we’ll know the true definition of zero COVID for a while because it’s been changing and evolving very rapidly over the past two weeks,” said Eddie Cheng, head of multi-asset portfolio management at Allspring Global Investments.

The new easing policy “may add to stronger demand for raw materials, but we still need to see … how it evolves,” Cheng said.

China’s “Zero COVID” policy has weighed heavily on the world’s second-largest economy. Services sector activity shrank to a six-month low in November.

Market sentiment in Europe remains weighed by “some inflationary forces,” notably the region’s energy crisis, Cheng said.

Final PMI data showed that business activity in the euro zone fell for a fifth straight month in November, suggesting the economy is slipping into a mild recession.

A strong November U.S. non-farm payrolls report rocked Wall Street on Friday as it challenged hopes for a less aggressive Federal Reserve.

The euro was up 0.2% at around $1.0557, while the dollar index was flat at 104.46, recovering from a five-month low earlier in the session on optimism over an easing of lockdown measures in China.

Euro zone government bonds were little changed, with benchmark German 10-year yields at 1.848%.

Bank of France Governor Fran├žois Villeroy de Gallo said on Sunday that the ECB should raise interest rates by 50 basis points on Dec. 15, reinforcing the ECB’s slowing of the monetary policy after a 75-basis-point hike in a row. The tightening pace is expected.

Investors’ attention remains focused on the pace at which the central bank ends its rate-hike cycle. The Reserve Bank of Australia meets on Tuesday and is expected to raise rates by just 25 basis points. The Bank of Canada meets on Wednesday and is expected to raise rates by 50 basis points.

Oil prices rose after OPEC+ countries left output targets unchanged.

A G7 price cap on Russia’s seaborne oil came into effect on Monday, as the West seeks to limit Moscow’s ability to fund the war in Ukraine. Russia said it would not comply with the measure even if it had to cut output.

Reporting by Elizabeth Howcroft Editing by Peter Graff

Our Standards: The Thomson Reuters Trust Principles.

Elizabeth Howecroft

Thomson Reuters

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

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