Global Stocks Rise as China Signals Stimulus for Shanghai

Global Stocks Rise as China Signals Stimulus for Shanghai

International stocks rose Monday, extending a rally that has pared some of this year’s losses, while US markets were closed for the Memorial Day holiday.

The Stoxx Europe 600 added 0.6%, led by shares of technology and luxury-goods firms. Germany’s DAX gained 0.8% and London’s FTSE 100 edged up 0.2%.

Global markets were boosted by the looming relaxation of some Covid-19 curbs in China. Shanghai’s Vice Mayor Wu Qing said over the weekend that authorities will loosen the conditions under which companies are able to resume work this week, and the city’s government laid out a 50-point plan for accelerating the economic recovery. The measures include tax cuts for businesses and subsidies for purchases of electric vehicles, the official Xinhua News Agency said.

Futures for the S&P 500 gained 0.6% by noon ET. The US stock market is due to reopen Tuesday, as is the Treasury market. Yields on government bonds retreated from their 2022 highs in the run-up to Friday’s close, helping lift stocks after a weekslong drubbing. The S&P 500 snapped a seven-week losing streak Friday and posted its biggest weekly gain since November.

Still, some money managers caution that the pickup in stocks and bond prices may be a short-lived blip in a longer-running retreat. They say most of the factors that have contributed to this year’s losses — the war in Ukraine, higher interest rates set by the Federal Reserve and a slowing economy — are still in place.

“We are about to see a bear-market rally — or are in the midst of it,” said Daniel Egger, chief investment officer at St. Petersburg. Gotthard Fund Management.

Mr. Egger said yields will begin to rise again and that forecasts for corporate earnings are too high, while profit margins are under pressure from high commodity prices. “This doesn’t bode well for stocks,” he said.

On the economic front, data showed inflation accelerating in major European economies. Germany’s annual inflation rate hit 8.7% this month, according to preliminary figures, the quickest pace since 1973. In Spain, consumer prices rose 8.5% on the year, up from the 8.3% rate recorded in April.

Shares of European luxury-goods companies that have tapped into Chinese demand benefited from the prospect of lighter-touch lockdowns. Hermès International gained 3.9% and Richemont Financial Company rose 2.9%. L’Oreal,

the French personal-care company, gained 2.1% and LVMH Moët Hennessy Louis Vuitton added 2.6%.

In commodity markets, benchmark Brent-crude futures rose 1.2% to $ 116.90 a barrel and touched their highest level in more than two months. Leaders of European Union members are due to meet Monday and Tuesday, after diplomats over the weekend failed to strike a deal on sanctions that would limit imports of Russian oil.

Global stock markets were broadly higher on Monday.


Photo:

peter parks / Agence France-Presse / Getty Images

In Asia, the Shanghai Composite Index added 0.6% and Hong Kong’s Hang Seng jumped 2.1%.

In China, companies that serve Chinese consumers registered some of the largest advances. Hot-pot restaurant chain Haidilao International Holding Ltd..

, brewer China Resources Beer (Holdings) Co. and sportswear company Li Ning Co. Ltd..

surged between 8.2% and 11% in Hong Kong.

Chinese internet stocks built on a rally from late last week, as the Hang Seng Tech Index rose 3.9%. The food-delivery giant Meituan jumped 6.8%. Chinese e-commerce platform Pinduoduo Inc..

whose stock trades in the US, on Friday reported better-than-expected quarterly profit and revenue, after similarly strong results from Alibaba Group Holding Ltd.

and Baidu Inc.

Investors are hopeful that China is past the worst of its Covid-19 wave in terms of lockdown severity and case numbers, said Michael Metcalfe, head of macro strategy at State Street Global Markets. That would lessen one of the forces pushing the world economy into a period of low growth and high inflation, he said.

Nonetheless, Mr. Metcalfe said, inflation remains elevated in both Europe and the US, maintaining the pressure on central banks to raise interest rates. “There’s nothing that we see in the current inflation trend that gives us any confidence,” he said.

Write to Joe Wallace at joe.wallace@wsj.com and Dave Sebastian at dave.sebastian@wsj.com

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