World shares rise on hopes China’s zero-COVID policy easing

TOKYO — World shares were higher on Friday, led by gains in Chinese markets as investors grasped at hopes for an easing of the country’s stringent pandemic controls.

Hong Kong’s benchmark soared more than 7% but then fell back, gaining 5.4% after a Communist Party newspaper, the Global Times, reported that local officials were being told not to impose overly burdensome restrictions to curb coronavirus infections.

The Shanghai Composite index also jumped, gaining 2.4% as sentiment was buoyed by an article in the party newspaper People’s Daily by China’s former top trade envoy, Liu He, who said the country would continue its market reforms. He appeared to be seeking to allay concerns after Liu and some other prominent reformers were dropped from the top ranks of leadership at a party congress last month.

European benchmarks were also higher in early trading. France’s CAC 40 added 0.9% to 6,299.09. Germany’s DAX rose 07% to 13,216.27. Britain’s FTSE 100 gained 0.8% to 7,247.39. The future for the Dow industrials was 0.3% higher while the future for the S&P 500 added 0.4%.

Hong Kong’s market has gyrated in the past few days as investors speculated over signs that Beijing might ease strict “zero-COVID” policies that have led to entire cities being kept in lockdown for weeks. The rules also require frequent mass testing and lengthy quarantines for travelers.

The Global Times and other media reported that the Chinese National Health Commission had advised local governments to try to curb outbreaks using the “minimum scale affected, and the shortest time and lowest cost possible.”

It said that was “in a bid to correct mistakes from overly strict measures that have caused damage to people’s properties and lives.” However, it also said that China was “unswervingly adhering to the dynamic zero-COVID strategy by preventing the import of cases and internal rebounds.”

This week has brought a flurry of speculation over the possibility that Beijing might alter course nearly three years into the pandemic. Investors are watching for signs of recovering demand in China, the world’s second-largest economy, and an end to disruptions to manufacturing and transport that have affected global supply chains.

There has been no official confirmation of broad policy changes.

“Rumors continue to circulate around China’s plans to relax certain COVID restrictions in the first major move away from its zero-COVID policy. Of course, this is pure speculation at the moment,” Craig Erlam, a senior market analyst at Oanda, said in a report.

The gains in Hong Kong’s Hang Seng index left it up almost 9% for the week, at 16,161.14. It’s still down 36% in the past year, sapped by China-U.S. tensions, coronavirus woes and a Chinese crackdown on technology companies. The Shanghai Composite added 80 points to 3,070.80.

Elsewhere in Asia, Tokyo’s benchmark Nikkei 225 dropped 1.7% to 27,199.74, catching up after Japan’s markets were closed Thursday for a holiday.

Australia’s S&P/ASX 200 added 0.5% to 6,892.50, and South Korea’s Kospi gained 0.8% to 2,348.43.

On Thursday, Wall Street’s benchmark S&P 500 lost 1.1% and the tech-heavy Nasdaq composite index sank 1.7%. The Dow lost 0.5% and the Russell 2000 also fell 0.5%.

The declines followed a sixth increase by the Federal Reserve of its benchmark rate this year. The three-quarters-of-a-percentage-point raise took short-term interest rates to a range of 3.75% to 4%, the highest level in 15 years. Wall Street is evenly split on whether the central bank ultimately will raise rates to a range of 5% to 5.25% or 5.25% to 5.50% next year.

Investors had been hoping for economic data signalling that the Fed might avoid more rate hikes that might go too far in slowing the economy and bring on a recession. But hotter-than-expected data from the employment sector suggests the Fed will remain aggressive. On Friday, Wall Street will get a broader update from the U.S. government’s October jobs report.

An update on consumer inflation is due out next week.

“A busy week ahead for economic releases is expected with the key focus on U.S. and China inflation figures for October. China will also update October trade figures. The United Kingdom meanwhile releases third quarter GDP figures while Germany’s industrial production data will also be due,” S&P Global Market Intelligence said in its report on the upcoming week.

In energy trading, benchmark U.S. crude rose $2.19 to $90.36 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gained $2.07 to $96.74 a barrel.

In currency trading, the U.S. dollar inched down to 147.64 Japanese yen from 148.25 yen. The euro cost 97.83 cents, up from 97.50 cents.