Stock markets rise on China support, pound rallies

Major stock markets mostly rose Tuesday as China moved to boost its flagging economy, while the pound hit a 15-month high against the dollar on expectations of more aggressive UK interest rate hikes.

Traders were looking ahead to US inflation data this week, set to provide fresh indication of the Federal Reserve's interest rate plans to combat inflation.

Hong Kong was again one of the best performers after Beijing signalled a crackdown against the tech sector was nearing an end.

China has meanwhile urged banks and other financial institutions to provide easier terms for ailing property developers by renegotiating the terms of their loans, with the aim of ensuring homes under construction were delivered.

And on Tuesday, state-run financial newspapers said more announcements were in the pipeline as well as measures to boost business confidence.

The moves come as the vast property industry in China strains under the weight of enormous debts, with some firms such as Evergrande on the verge of collapse.

Read also

UK unemployment climbs as inflation weighs on economy

The crisis has sent shivers through the world's number-two economy, which has in turn weighed on global growth.

The chairman of Australian mining giant Rio Tinto this week warned of a knock-on effect on the commodities sector.

Beijing has come under immense pressure in recent months to unveil new growth-fuelling policies after a series of below-par indicators showed the post-Covid rebound has run off the tracks.

"The policies are intended to hedge against the strong headwinds in the market," said Zhou Hao, of Guotai Junan International Holdings.

Pound jumps

Elsewhere, London stocks spent most of the day in the red as the pound strengthened, impacting share prices of multinationals earnings in dollars, but closed with a small gain as sterling gave up some of its gains during the afternoon.

The pound reached a 15-month high above $1.29 after UK jobs and wages data indicated that the Bank of England still had some way to go before it stops hiking interest rates aimed at cooling high inflation.

Read also

Asian markets rise as China pledges fresh property support

"While there are some signs the tightness in the labour market is starting to ease, wage growth remains uncomfortably high in the context of the Bank of England's efforts to get surging prices under control," noted AJ Bell investment director Russ Mould.

"Borrowers face more pain with the prospect of further rate hikes to come."

Wall Street pushed higher as investors look forward to the release of the consumer price index on Wednesday, with expectations it will drop to 3.1 percent from 4.0 percent in May.

"A weaker than forecast figure could signal that inflation is moving tellingly towards the Fed's target (of two percent inflation), which could result in a brief rally if the consensus then changes to one more (rate) hike this year as opposed to the two currently in place," said Richard Hunter at Interactive Investor.

Investors are also looking to the start of the corporate earnings season later this week.

Read also

Tech rally helps Hong Kong lead most Asia markets higher

Hunter said "the corporate reporting season will show whether the hiking cycle has crimped growth, earnings and margins over the last quarter, or whether the resilience of the economy at the macro level has translated to companies on the ground."

Oil prices rose on hopes that the Chinese stimulus will boost demand.

"There is also increasing evidence that the recent output cuts are now starting to have an effect with a tightening of supply," said market analyst Michael Hewson at CMC Markets.

Key figures around 1530 GMT

New York - Dow: UP 0.4 percent at 34,086.90 points

London - FTSE 100: UP 0.1 percent at 7,282.52 (close)

Frankfurt - DAX: UP 0.8 percent at 15,790.34 (close)

Paris - CAC 40: UP 1.1 percent at 7,220.01 (close)

EURO STOXX 50: UP 0.7 percent at 4,286.56 (close)

Tokyo - Nikkei 225: FLAT at 32,203.57 (close)

Hong Kong - Hang Seng Index: UP 1.0 percent at 18,659.83 (close)

Read also

US economy adds 209,000 new jobs as hiring slows

Shanghai - Composite: UP 0.6 percent at 3,221.37 (close)

Pound/dollar: UP at $1.2890 from $1.2859 on Monday

Euro/dollar: DOWN at $1.0992 from $1.1006

Dollar/yen: DOWN at 140.54 yen from 141.33 yen

Euro/pound: DOWN at 85.27 pence from 85.53 pence

Brent North Sea crude: UP 1.9 percent $79.20 per barrel

West Texas Intermediate: UP 2.3 percent at $74.65 per barrel

Source: AFP