Global markets rally on hints China will ease Covid curbs and upbeat US jobs data

Wall Street is banking on hopes the Fed will ease up on its aggressive rate rises as the economy improves

China — the world's second-largest economy that has some of the toughest zero-Covid policies, including widespread lockdowns, quarantines and testing — has been said to be considering easing these rulShow more

Global stock markets rallied on Friday to close the week higher, banking on hopes China will begin easing its tough Covid-19 restrictions and optimism that the Federal Reserve will tone down its aggressive interest rate hikes following upbeat US jobs data.

China — the world's second-largest economy that has some of the toughest zero-Covid policies, including widespread lockdowns, quarantines and testing — has been said to be considering easing these rules, according to unverified posts circulating on social media.

But even without confirmation, stocks in the mainland and Hong Kong swung to gains.

Adding to the optimism were Beijing's plans to end a regulation that imposes a penalty on airlines for bringing virus cases into the country, which was first reported by Bloomberg, and German Chancellor Olaf Scholz saying China will make BioNTech’s vaccine available to foreign residents, which would be the first approval of the mRNA vaccine there.

However, a spokesperson from the China National Health Commission dashed those hopes on Saturday, stressing in a press conference that the country will soldier on with its strict measures.

"At present, China is still facing the dual threat of imported infections and the spread of domestic outbreaks", Mi Feng said. "The disease control situation is as grim and complex as ever. We must continue to put people and lives first."

Hong Kong's Hang Seng Index surged 5.4 per cent, its best weekly showing since 2015, while the Shanghai Composite added 2.4 per cent.

Technology giants in China, including conglomerate Alibaba Group, internet major Baidu and online retailer JD.com all rose at least 7 per cent, while electric vehicle makers also surged.

Tokyo's Nikkei 225, however, bucked the trend, shedding 1.7 per cent, as it tried to make up for Thursday's losses following a holiday on Wednesday.

Meanwhile, US nonfarm payrolls increased by 261,000 in October, easily beating a 193,000 projection from a Bloomberg survey of economists, the Labour Department said on Friday. It also revised September data to show that 315,000 jobs were added to the economy instead of the previously reported 263,000.

The Fed on Wednesday raised its interest rates by 75 basis points for the fourth consecutive time as it continues to battle stubbornly-high inflation, but signalled it could take a less aggressive stance.

"This economic reading [jobs data] commands the most attention among investors and traders as the economic data sets the trading tone and influences it for the rest of the month," Naeem Aslam, chief market analyst at Avatrade, said in a note.

"As always, the Fed will watch this data very closely, which is highly likely to affect their monetary policy."

At the close on Wall Street, the Dow Jones Industrial Average rose 1.3 per cent, the S&P 500 climbed 1.4 per cent and the tech-heavy Nasdaq Composite added 1.3 per cent.

In Europe, London' FTSE 100 closed 2 per cent higher after the pound rebounded against the dollar, after the Bank of England (BoE) said the UK economy is at risk of a two-year recession, which it says could have already begun.

The BoE raised its key interest rate by 75bps on Wednesday to 3 per cent, its biggest hike in more than three decades, as it aims to rein in high inflation. That triggered a 2 per cent fall in the British currency.

Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, questioned the BoE's reasons for the rate increase, arguing that the "useless 75bps hike" has set up the pound to weaken further.

"Sterling dived anyway, and will dive deeper. The divergence between the Fed, looking for smaller rate hikes but toward a higher end rate, and the BoE, which doesn’t want to get more aggressive than this, will likely weigh on the pound-dollar in the medium run. We could again see the pair testing parity in the coming weeks," he said.

Elsewhere in Europe, Frankfurt's DAX climbed 2.5 per cent, while Paris' CAC 40 rose 2.8 per cent.

In commodities, oil prices surged to two-month highs over the China news and the Group of Seven advanced economies agreeing to set a price cap on Russian crude. Brent settled 4.12 per cent higher at $98.57, while West Texas Intermediate closed up 5.04 per cent at $92.61 a barrel.

Gold, meanwhile, posted its best showing in a month, rising as high as 3.4 per cent before settling up 2.8 per cent at $1,676.60 an ounce to end the week 1.9 per cent higher.

Global gold demand increased 28 per cent year-on-year to 1,181 tonnes in the third quarter of 2022 as investors flocked to the precious metal's safe-haven appeal, the World Gold Council said in a report this week.