LONDON, UK – Global stocks rose Friday on China’s slowing inflation and economic reopening, alongside hopes of less aggressive interest rate hikes next week.
Sentiment brightened on China’s decision to shift away from its nearly three-year zero-Covid strategy of lockdowns and mass testing that slammed the economy.
After widespread protests across the country, leaders have decided to loosen their grip, fanning excitement that growth will pick up as activity returns to normal.
Investors were meanwhile hopeful that central banks in the United States, eurozone and UK will next week ease the pace of interest rate hikes despite inflation remaining at the highest levels in decades.
“Sentiment has been supported by China dropping its Zero Covid policy – and optimism that the sharp central bank policy tightening will become less aggressive,” City Index analyst Fawad Razaqzada told AFP.
“These factors have already been slowly priced in over the past few weeks… (which) means there is a risk we might see the markets drop, as the focus turns to worries over economic growth.”
Markets also rose on news that China’s consumer inflation slowed further in November, falling below two percent and providing authorities room to unveil fresh stimulus measures.
US inflation in sights
Traders were setting their sights also on the release of two key US inflation reports ahead of the Federal Reserve’s final policy meeting of the year.
In light of data signaling that almost a year of interest rate hikes was beginning to impact prices, the US central bank is widely expected to announce a 50 basis point lift at the gathering, compared with the previous four straight 75-point increases.
But there remains some concern that the world’s top economy remains resilient and the jobs market too strong, meaning the Fed might have to keep tightening monetary policy longer than had been hoped.
That uncertainty has weighed on US markets, which have endured a tough December so far, and analysts warned of further pain.
The dollar dropped on Friday, having surged to record or multi-decade highs earlier this year owing to the Fed’s hawkish tilt and its use as a safe-haven hedge against volatility.
Oil prices rebounded slightly but remains down over 10 percent this week as recession expectations weigh on the demand outlook.