A rapid relaxation of Covid-19 restrictions in China following rare public protests a week ago was giving stock markets a lift on Monday, while the risk-on mood was undermining the dollar.
‘After several weeks of investors asking, ’will it, or won’t it?’ about China relaxing its Covid restrictions, the balance of opinion seems to be positive at the start of the new trading week,’ said Russ Mould at AJ Bell.
The FTSE 100 index was up 23.69 points, or 0.3%, at 7,579.92 at midday on Monday. The FTSE 250 was up 81.79 points, or 0.4%, at 19,445.07, while the AIM All-Share was down 0.64 of a point, or 0.1%, at 852.81.
The Cboe UK 100 was up 0.3% at 758.44, the Cboe UK 250 was up 0.3% at 16,843.68, and the Cboe Small Companies was up 0.3% at 13,301.81.
Multiple cities in China have started to roll back some restrictions after public resentment at harsh and prolonged containment measures reached a boiling point last weekend, when spontaneous protests broke out in multiple cities.
Shanghai residents will no longer need a 48-hour negative test result to use public transport and enter outdoor venues such as parks and tourist attractions, authorities said in a WeChat post on Sunday.
Shanghai followed multiple cities including Beijing, Tianjin, Shenzhen and Chengdu, which all cancelled the testing requirement for public transport on Saturday.
The dollar was weaker at midday on Monday, with the US currency hitting its lowest level since June in early morning trade.
‘With risk appetite improving in global markets, following the relaxation of Covid-control measures in several Chinese cities, the dollar’s haven appeal is diminishing,’ said Ricardo Evangelista at ActivTrades.
The pound was quoted at $1.2259 at midday on Monday in London, up from $1.2240 at the London equities close on Friday.
The euro stood at $1.0561, higher against $1.0478 late Friday. Against the yen, the dollar was trading at JP¥135.33, down from JP¥135.41.
In London, it was a positive day for China-focused stocks.
Asia-focused insurer Prudential topped the FTSE 100 index, up 6.7% at midday. Meanwhile, Fidelity China Special Situations rose 4.8% in the FTSE 250 and JPMorgan China Growth & Income was up 4.5% among London small-caps.
Miners also made gains as investors anticipated that the positive developments in China may mean a rebound in demand for commodities, which, in turn, pushed prices higher.
Brent oil was quoted at $87.81 a barrel, higher against $86.65 on Friday. Gold, which also benefited from the weaker dollar, was priced at $1,794.00 an ounce at midday on Monday, up from $1,788.36 late Friday.
Fresnillo was up 4.2%, Rio Tinto was up 3.2%, and Anglo American was up 2.8%.
Glencore rose 1.8%. The Anglo-Swiss miner and commodities trader said it will pay $180 million to the Democratic Republic of Congo to cover claims linked to alleged acts of corruption for over a decade.
Glencore said its agreement with the DRC covered all present and future claims arising from any corruption allegations in the DRC between 2007 and 2018.
Early last month, Glencore said it would pay £281.0 million after it admitted to bribing offences in Africa. Glencore was found to have used bribes to secure better access to oil in Nigeria, Cameroon and Ivory Coast between March 2012 to April 2016. The penalty was imposed by the Southwark Crown Court in London, where Glencore had admitted to five counts of bribery and two counts of failure to prevent bribery.
In the FTSE 250, TR Property Investment Trust was up 1.4% despite swinging to loss in the first half of its financial year.
The London-based property investor reported a pretax loss of £517.6 million in the six months that ended September 30, versus a profit of £209.0 million the year before.
‘Macro-economic and political forces continue to dominate both markets and investors’ perceptions of the future trajectory of the value of all risk assets. Inflation is everyone’s focus as we all grapple with the consequences of the unwinding of the era of cheap capital engineered by the actions of central banks following the global financial crisis,’ TR Property Investment said.
Elsewhere, AG Barr rose 3.0% after said it bought Boost Drinks, a branded drinks business, for £20 million.
The Scottish soft drink manufacturer expects the acquisition to be accretive to earnings per share in the first full year of ownership, but noted it will dilute the group’s operating margin in the short term.
‘Boost is one of the UK’s most recognisable functional drinks brands, and we are delighted to welcome the team into the AG Barr group. The Boost portfolio offers premium taste and performance at a competitive price, with a strong market position in the UK independent retail channel,’ commented Chief Executive Roger White.
Cineworld rose 1.9% after Bloomberg reported on Sunday that the company intends to emerge from bankruptcy intact.
‘Cineworld has not initiated, and does not intend to initiate, an individual auction for any of its US, UK or [rest of world] businesses on an individual basis,’ a spokesperson for the company told Bloomberg over the weekend.
The statement came after another Bloomberg report on Friday that said Cineworld’s creditors had held talks about breaking up the chain and selling its Eastern European operations.
In European equities on Friday, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.5%.
The eurozone services industry hit a 21-month low in November, according to new data.
The S&P Global eurozone services purchasing managers’ index fell to 48.5 points in November, down from 48.6 points in October. When excluding months hit by Covid-19 restrictions, November’s contraction was the second-sharpest since May 2013.
The S&P Global eurozone composite PMI - which is a weighted average of the services and manufacturing sector - posted in sub-50 contraction territory for the fifth month in a row during November.
S&P Chief Business Economist Chris Williamson said: ‘A fifth consecutive monthly falling output signalled by the PMI adds to the likelihood that the eurozone is sliding into recession. However, at present the downturn remains only modest, with an easing in the overall rate of contraction in November means so far the region looks set to see GDP contract by a mere 0.2%.’
Stocks in New York were called to open lower on Monday, with the DJIA and the S&P 500 both called down 0.3%, and the Nasdaq Composite down 0.2%.
Still to come on Monday, there is a service PMI reading from the US at 1445 GMT.
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