On Monday, international stocks rose as US markets were closed for the Memorial Day Holiday, This extended a rally that made up some of this years losses.
Led by shares of luxury goods firms and technology companies, the Stoxx Europe 600 added .6%. Meanwhile the London FTSE100 rose .2% and Germany’s DAX gained .8%.
The relaxation of Covid restrictions in China boosted markets, with hopes of a return to production and a reduction of supply chain issues arising from lockdowns in industrial areas. Shanghai Vice-Mayor Wu Qing said over the weekend that the government there will loosen restrictions, allowing companies to resume work this week. Meanwhile the government laid out a 50 point plan to try and speed its economic recovery, including tax cuts for businesses and electric vehicle subsidies.
S&P 500 futures gained .6% by noon off the news.
Some analysts however caution that although we may see rises in the days and weeks to come, they may be blips within broader retreats. They note the factors which have been hurting the market thus far, inflation, the war in Ukraine, higher interest rates, and a slowing economy, are all still present.
Daniel Egger, chief investment officer at St. Gotthard Fund Management said forecasts for corporate earnings are still too high as profit margins are under pressure from high commodity prices. He said, “This doesn’t bode well for stocks,” adding, “We are about to see a bear-market rally—or are in the midst of it.”
Meanwhile inflation appeared to be accelerating in Europe. Annual inflation in Germany hit 8.7% this month. That is the quickest rise since 1973. Meanwhile consumer prices rose 8.5% on the year in Spain in May, up from 8.3% in April.
In commodities, Brent Crude futures rose 1.2% to $116.90 per barrel, hitting a 2 month high.
The Shanghai Composite was up .6% and the Hang Seng rose 2.1% in Asia. Chinese internet stocks drove the Hang Seng Tech Index up 3.9%, with the food-delivery titan Meituan up 6.8%. Helping drive the surge, Chinese ecommerce platform Pinduoduo and Alibaba both reported better than expected quarterly profits.
Many are hoping China is past the worst of the COVID-19 lockdowns, which would eliminate a major downward force acting on global markets. But concerns over inflation in the west and high energy prices due to market disruptions produced by Russian sanctions still have investors feeling that despite the current rises, caution is still the order of the day.
