Investors are hopeful that the worst is now behind China as lockdowns are poised to ease in major cities including Shanghai and Beijing.
Shanghai policymakers have laid out a 50-point plan to get the economy back on its feet. The “extraordinary” measures are expected to alleviate 300bn yuan of financial burden for individuals and businesses, including:
Delay insurance and mortgage fees for impacted businesses
Delay tax filing deadlines for individuals and companies
4-6 month rent reduction for small businesses that rent from state-owned properties
Subsidies for private-owned properties that reduce rent for tenants
Supporting construction of infrastructure projects including rail, ports and energy infrastructure
Local Chinese governments have also released stimulus packages targeted at boosting car sales, including:
Rebates of 10,000 yuan (US$1,500) for trade-ins of gasoline vehicles for EVs for the rest of the year
Increasing new license plate quotes (which is generally a fixed number)
China reopening could extend this so called 'bear market rally', ahead of catalysts such as the June 17 Fed meeting and surging oil prices.
The resumption of industrial activity and social mobility in China could see some positive flow for sectors such as commodities (notably iron ore and lithium) and oil.
According to Bloomberg, several Chinese lithium and battery stocks have rallied more than 30% from late April lows, buoyed by the view that easing restrictions and subsidies will boost raw material demand from EV makers.
The recent bounce has many investors wondering "how long will this rally last?"
The US 10-Year Treasury Yield, which topped out in early May around 3.2% has started to stabilise and bounce off 2.7% levels. Surging yields has caused troubles for equity markets.
On the economic front, Germany's annual inflation rate hit 7.9% in April, the highest reading in almost half a century.
Inflation could remain stubborn following EU's partial Russian oil ban alongside other oil demand side factors such as China's reopening and the northern hemisphere's "driving season".
Overnight, crude oil prices rallied back to a near 3-month high of US$122 a barrel.
Finance Writer & Social Media
Get the latest news and media direct to your inbox