# Asia shares bank on eventual China opening; oil gains
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Asian shares rally on pandemic restrictions easing in China
Meta Description: Get the latest on Asian shares and market trends as pandemic restrictions start to ease in China, boosting global growth and commodity demand.
URL: https://financedigest.com/asia-shares-bank-on-eventual-china-opening-oil-gainshtml

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By Wayne Cole

SYDNEY (Reuters) – Asian shares extended their rally on Monday as investors hoped steps to unwind pandemic restrictions in China would eventually brighten the outlook for global growth and commodity demand, nudging the dollar down against the yuan.

The news helped oil prices firm as OPEC+ nations reaffirmed their output targets ahead of a European Union ban and price caps on Russian crude, which begin on Monday. \[O/R\]

More [Chinese cities announced an easing of coronavirus curbs](https://www.financedigest.com/were-going-to-be-free-chinese-cheer-as-covid-curbs-are-loosened.html "‘We’re going to be free’: Chinese cheer as COVID curbs are loosened") on Sunday as Beijing tries to make its zero-COVID policy less onerous after recent unprecedented protests against restrictions.

There were also [reports Beijing might lower the threat](https://www.financedigest.com/russian-threat-to-baltic-security-rising-estonian-intelligence-report.html "Russian threat to Baltic security rising – Estonian intelligence report") classification for COVID-19, though clarity was lacking on timetables for future steps.

While the easing of some restrictions does not equate to a wholesale shift away from the dynamic COVID zero strategy just yet, it is further evidence of a shifting approach and financial markets look to be firmly focussed on the longer term outlook over the near-term [hit to activity as virus cases look set](https://www.financedigest.com/uk-economy-set-for-smaller-hit-in-2023-than-previously-feared-imf.html "UK economy set for smaller hit in 2023 than previously feared – IMF") to continue,” said Taylor Nugent, an economist at NAB.

Chinese blue chips gained 1.7%, on top of last week’s 2.5% bounce, while the Hang Seng jumped 3.5%.

MSCI’s broadest index of Asia-Pacific [shares outside Japan added 1.7% to a three-month top](https://www.financedigest.com/young-leaders-forum-niamh-corbett-shares-her-top-5-tips.html "Young Leaders Forum: Niamh Corbett shares her top 5 tips"), after rallying 3.7% last week. Japan’s Nikkei edged up 0.1%, while [South Korea](https://www.financedigest.com/south-korea-has-not-supplied-lethal-weapons-to-ukraine-president-says.html "South Korea has not supplied lethal weapons to Ukraine, president says") eased 0.4%.

EUROSTOXX 50 futures added 0.1%, while FTSE futures were flat. S&P 500 futures and Nasdaq futures both fell 0.1%.

[Wall Street](https://www.financedigest.com/weary-wall-street-cheers-improved-consumer-confidence.html "Weary Wall Street cheers improved consumer confidence") had lost some momentum on Friday after November’s robust U.S. payrolls report challenged hopes for a less aggressive Federal Reserve, though Treasuries still [ended last week](https://www.financedigest.com/european-shares-end-five-day-losing-streak-still-down-for-the-week.html "European shares end five-day losing streak, still down for the week") with solid gains.

Indeed, 10-year note yields have fallen 74 basis points [since early](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") November, effectively undoing much of the tightening of the Fed’s last outsized increase in cash rates.

[Markets are wagering Fed rates will top out at 5% and the European Central Bank](https://www.financedigest.com/oil-markets-steady-as-investors-weigh-banking-crisis-russia.html "Oil markets steady as investors weigh banking crisis, Russia") around 2.5%.

“But U.S. and Euro area labour demand remain surprisingly strong, and alongside a recent easing in financial conditions, the risks are shifting toward higher-than-anticipated terminal [rates for both the Fed](https://www.financedigest.com/shares-fall-with-oil-prices-amid-concerns-about-u-s-fed-rate-hikes.html "Shares fall with oil prices amid concerns about U.S. Fed rate hikes") and the ECB,” warns Bruce Kasman, head of economic research at JPMorgan.

The combination of labour market resilience with sticky wage inflation adds to the risk that the Fed will deliver a higher than 5% rate forecast at its upcoming meeting and that Chair Jerome Powell’s [press conference](https://www.financedigest.com/5-top-tips-when-holding-a-crisis-press-conference.html "5 Top Tips When Holding a Crisis Press Conference") will shift to more open-ended guidance regarding any near-term ceiling on rates.

DOLLAR VULNERABLE

The [Fed meets](https://www.financedigest.com/german-gloom-dampens-stocks-as-fed-ecb-meetings-beckon.html "German gloom dampens stocks as Fed, ECB meetings beckon") on Dec. 14 and the ECB the day after. Speaking on Sunday, French central [bank chief Francois Villeroy de Galhau said he favoured a hike](https://www.financedigest.com/big-ecb-hike-adds-fuel-to-the-banking-sector-fire.html "Big ECB hike adds fuel to the banking sector fire") of half a point next week.

[Central banks](https://www.financedigest.com/central-banks-hike-rates-again-but-a-pause-is-coming.html "Central banks hike rates again, but a pause is coming") in Australia, Canada and India are all expected to raise their rates at meetings this week.

The steep decline in U.S. yields has taken a toll on the dollar, which fell 1.4% last week on a basket of currencies to its [lowest since June](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020").

It lost 3.5% on the yen alone and last traded at 134.34, leaving October’s peak of 151.94 a distant memory. The [euro resumed it rise](https://www.financedigest.com/euro-zone-economic-sentiment-rises-in-january-to-seven-month-high.html "Euro zone economic sentiment rises in January to seven-month high") to $1.0578, having added 1.3% last week to its highest since early July. \[USD/\]

The [dollar also slipped under 7.0 yuan in offshore trade to hit the lowest in three months](https://www.financedigest.com/european-shares-hit-nine-month-high-dollar-wobbles-after-powell-remarks.html "European shares hit nine month high, dollar wobbles after Powell remarks") at 6.9677.

The drop in the [dollar and yields has been a boon for gold](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides"), which was up 0.5% at a four-month peak of $1,807 an ounce after rising 2.3% last week. \[GOL/\]

[Oil prices bounced after OPEC+ agreed to stick to its oil output](https://www.financedigest.com/uk-oil-gas-firms-to-leave-years-worth-of-output-in-ground-with-tax-hikes-report.html "UK oil, gas firms to leave year’s worth of output in ground with tax hikes-report") targets at a meeting on Sunday.

The Group of Seven and European Union states are due on Monday to impose a $60 per barrel [price cap on Russian seaborne oil](https://www.financedigest.com/oil-prices-rebound-after-opec-upgrades-china-demand-outlook.html "Oil prices rebound after OPEC upgrades China demand outlook"), though it was not yet clear what impact this would have on global supply and prices.

Brent gained $1.67 to $87.24 a barrel, while U.S. crude rose $1.46 to $81.44 per barrel.

(Reporting by Wayne Cole; Editing by Sam Holmes)


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