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European and Asian stocks rallied on Tuesday, as recent efforts by Beijing to prop up markets bolstered China-linked sectors, while investors prepared for US labour market data due later in the day.
Europe’s region-wide Stoxx Europe 600 index rose 0.6 per cent, following gains in the previous session, while France’s Cac 40 was up 0.3 per cent and Germany’s Dax added 0.4 per cent. London’s FTSE 100 advanced 1.4 per cent as markets reopened after a bank holiday.
Basic materials stocks led gains, with the Stoxx Europe 600 Basic Resources index up 1.7 per cent, as traders hoped that fresh economic support measures announced in China over the weekend would bolster demand in the world’s second-largest economy.
Hong Kong’s Hang Seng index advanced 2 per cent and the CSI 300 climbed 1 per cent on Tuesday. China’s benchmark index had risen 1.2 per cent a day earlier, after much larger early gains melted away.
China’s Ministry of Finance on Sunday cut its levy on share trading to 0.05 per cent, the first such reduction since the 2008 financial crisis and the latest in a number of measures intended to support the country’s struggling markets.
Separately, the China Securities Regulatory Commission, a stock market regulator, promised to slow the pace of initial public offerings as new listings tend to depress valuations and lower liquidity in broader markets.
The moves mark the latest in a string of attempts by Chinese authorities to reinvigorate the economy, which struggled to bounce back as the country reopened from three years of strict Covid-19 lockdowns earlier this year.
“If policy measures continue to be unveiled in the coming weeks, the market narrative may shift from ‘too little, too late’ to a more confident stance as policymakers regain credibility”, said Mark Haefele, chief investment officer at UBS Global Wealth Management.
Beijing vowed to extend greater economic support in late July, which temporarily boosted net foreign inflows to Chinese stocks, but they have since been completely reversed.
Meanwhile, investors’ attention turned to fresh US labour market data, which later in the day was expected to show that the number of new job openings fell slightly to 9.465mn in July, in a sign that high interest rates were weighing on demand for workers.
The data comes ahead of the closely watched US non-farm payrolls report on Friday, which has been one of the key metrics feeding into the Federal Reserve’s policy decisions as its historic monetary tightening cycle approaches its end.
Having taken interest rates to a 22-year high at its last policy meeting in July, the Fed last week signalled that its future decisions would be data-dependent, adding extra weight to the inflation and labour market reports due before the central bank’s next meeting in September.
The US personal consumption expenditures price index — the Fed’s preferred measure of inflation — is also due later this week.
Yields on the policy-sensitive two-year US Treasuries slipped 0.01 percentage point to 5 per cent, while yields on the benchmark 10-year note fell 0.02 percentage points to 4.19 per cent. Bond yields fall as prices rise.
US futures contracts tracking the benchmark S&P 500 rose 0.1 per cent, while those tracking the tech-heavy Nasdaq 100 were flat ahead of the New York opening bell.
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