European stocks, US futures advance as China rallies

Signal from China’s central bank that it wants to ease monetary policy lifts stocks

Photograph: iStock

Photograph: iStock

 

US equity futures and European stocks advanced, following a rally that began in China after the country’s central bank pumped cash into the financial system, signaling that it wants to ease monetary policy.

Commodity and technology shares supported the Stoxx Europe 600 Index amid light trading volumes. Covid-19 vaccine contender CureVac continued Friday’s rally, surging more than 50 per cent in US pre-market trading. Gold, copper and nickel advanced, while crude oil retreated. The dollar weakened against most of its peers and Treasuries were steady.

The Irish index of shares fell 0.48 per cent to 6,350, with banking and food stocks dipping lower.

In Asia, the Shanghai Composite closed up 2.3 per cent after the People’s Bank of China supplied extra liquidity to commercial banks. The net injection indicates “a more accommodative stance on keeping liquidity levels ample” so that commercial banks can continue to support bond issuance and to stabilise credit growth, said Liu Peiqian, a China economist at Natwest Group in Singapore.

Trading subdued

Overall trading in markets was subdued on Monday as traders weighed the prospect of tighter quarantine measures against continued government support. Declines among airline shares and travel agencies kept a lid on gains in Europe as Spain and Italy told nightclubs to close and France’s public health agency warned that virus indicators are trending upward.

In the backdrop, tensions are continuing to mount between the US and China. Senior officials from Washington and Beijing late last week postponed trade talks that had been set for this past weekend to discuss the status of the “phase one” trade deal signed early in the year.

Minutes due to be released on Wednesday from the Federal Reserve’s most recent policy meeting may yield clues about whether officials plan to introduce new language in September.

“The economy is going to continue to reopen as we move into the end of this year,” Brett Ewing, chief market strategist at First Franklin Financial Services, said on Bloomberg TV. “If you can buy into that story, you need to be ahead of money flowing into these value and cyclical stocks – if you wait for a vaccine to come out, you’re going to be missing probably the biggest opportunity right now.” – Bloomberg