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Stocks and Oil Higher, as China Eases Quarantine Rules

On Tuesday, global shares were trading higher, after a firming in oil prices and easing of restrictions in China for international travelers. This fueled hopes for improved growth and a demand revival for commodities.

China’s decision

In a major sign of easing, China announced that it was cutting down the quarantine time required for international travelers by half. These rules have been a real hurdle in cross-border travel and the number of international flights currently were just 2% of the levels seen before the pandemic. The announcement gave a boost to Asian shares and European stocks also turned positive.

This meant that the MSCI index for global shares was also in the green and on track to record a gain for the fourth consecutive session. The zero-COVID and strict regulations in China have dragged down activity in the second-largest economy in the globe. However, now an easing in restrictions and reopening of some prominent cities after lockdowns gave optimism a boost, with people hoping that growth can resume once more. Market analysts said that this was an excellent step forward and could result in a strong recovery.

Indexes record gains

There was a 0.4% increase in the MSCI’s broadest index comprising of Asia-Pacific shares, whereas a 0.9% gain was also recorded in Hong Kong’s Hang Sheng index. A 1% advance was seen in China’s CSI 300 index, while a 5.5% rise was recorded in the tourism shares in the country.

There was a 0.7% increase in the continent-wide STOXX 600 index, taking it to a two-week high thanks to a boost in gas and oil. Mining stocks also recorded gains because of rising commodity prices, as there was the hope of increasing demand for metals in China.

There were also gains in US stock index futures with a 0.5% rise seen in S&P 500 e-minis. However, developed market equities continue to have a challenging outlook with central banks attempting to strike a balance between slowing growth and extremely high inflation. Analysts said that equity markets would remain volatile until central banks decide to adjust their hawkish stance.

The problem is that this kind of change is not expected right away, as the economy has to slow down significantly for bringing down inflation.

ECB policy

On Tuesday, the annual forum of the ECB on Central Banking continued with Christine Lagarde, the President of the European Central Bank (ECB) confirming plans of increasing interest rates the next month. However, there were no hints about how much rise could be expected and Lagarde only said that they would take things gradually.

After her comments, yields in the eurozone had climbed, as investors were still concerned about monetary tightening and inflationary risks. There was not much change in the euro against the US dollar after the ECB president’s comments. Meanwhile, a 0.1% increase in China’s offshore yuan was recorded, after Beijing announced the easing of travel restrictions. The US dollar index, which measures the greenback against a basket of six other currencies, also remained mostly unchanged at 103.99.

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