Europe gains as China loosens restrictions
Eurozone stock markets are powering ahead this afternoon thanks to the news the Beijing authorities are easing up on some of the Covid restrictions. Beijing and Shanghai have dropped some of the rules in regards to lockdowns, and that is being viewed as a step in the right direction, but the major cities are still a long way off from a total ending of the lockdowns. The New York Stock Exchange remains closed today as the US commemorates Memorial Day, but keep in mind the NASDAQ surged over 3% on Friday – that is also playing a role in today’s upward move. Lately, the activity in US tech stocks has set the scene for equity markets around the globe. Even though individual shares are not being traded in the US today, US index futures are showing healthy gains.
Inflation is a hot topic now as there are regular headlines about a cost-of-living crisis. CPI in Germany jumped from 7.8% to 8.7% - its highest in almost 50 years. Economists were anticipating 8.1%, so it easily exceeded forecasts. It is worrying that inflation is at multi-decade highs in the largest economy in the eurozone, but the European Central Bank has yet to change its rates. In recent weeks, there have been several ECB policymakers hinting that rates might be lifted in July, included in the group is Christine Lagarde – the ECB President. The euro is outperforming today, EUR/USD hit a five-week high, and the single currency is up against the pound, the Australian dollar, and the yen. On the other side of the coin, the US dollar index has dropped to a level last seen since late April, as the dollar continues to lose heat. In the past few weeks, there has been a big switch in attitude in the foreign exchange market, as the dollar’s cough has been softened, while the euro is in high demand.
WTI and Brent crude are higher as the EU is still trying to negotiate a region-wide ban on Russian oil. There is a clash of opinions within the bloc with regards to an embargo, and it appears the action will not be a severe as initially thought. Gold is fractionally higher as the fall in the greenback is making the yellow metal more attractive.