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Stocks swing higher as China eases quarantine rules

Asian shares swung into positive territory in afternoon trade on Tuesday, propelled by China’s decision to ease some quarantine requirements for international arrivals, with Hong Kong stocks particularly supported.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was up 0.5%, having spent most of the day in the red. The index has fallen 3.8% so far this month.

Health authorities said on Tuesday that China will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home.

Following the news, Hong Kong’s Hang Seng index .HSI reversed its losses and jumped 0.85% in afternoon trade.

In China, the blue-chip CSI300 index .CSI300 was 1% higher, also having clawed back earlier losses.

The sharp change in mood looked set to last into the global day with the pan-region Euro Stoxx 50 futures STXEc1 up 0.31%, German DAX futures FDXc1 0.2% higher and FTSE futures FFIc1 climbing 0.47%. U.S. stock futures ESc1 rose 0.46%.

“With local new infections dropping further in June, and COVID curbs to ease more, we expect the (Chinese) economy to continue to recover,” BofA said in its note. “That said, given soft domestic demand and lingering COVID uncertainties, the mending path is likely to be bumpy in the coming months.”

Market sentiment was also boosted by an official’s remarks that Beijing would roll out tools to cope with economic challenges as COVID-19 outbreaks and risks from the Ukraine war pose a threat to employment and price stability.

Australian shares .AXJO were up 0.86%, while Japan’s Nikkei stock index .N225 rose 0.66%.

U.S. stocks ended a volatile trading session slightly lower on Monday with few catalysts to sway investor sentiment as they approach the half-way point of a year in which equity markets have been slammed by heightened inflation worries and tightening Fed policy.

Interest rate sensitive megacaps such as Amazon.com Inc AMZN.O, Microsoft Corp MSFT.O and Alphabet Inc GOOGL.O were the heaviest drags on the U.S. main indexes.

The Dow Jones Industrial Average .DJI fell 0.2%, the S&P 500 .SPX lost 0.30% and the Nasdaq Composite .IXIC dropped 0.72%.

Oil continued to rise with investors still weighing worries about an economic slowdown against concerns over lost Russian supply amid sanctions related to the conflict in Ukraine.

U.S. crude CLc1 ticked up 1.02% to $110.69 a barrel. Brent crude LCOc1 rose to $116.42 per barrel.

“A seam of tight supply news bolstered the (oil) market,” said analysts at Commonwealth Bank of Australia. “Political unrest might curtail supply from a couple of second-tier producers, Ecuador and Libya. And then there’s the G7’s proposed price cap on Russian oil.”

In bond markets, Treasury yields climbed on Monday following capital and durable goods orders data and as pending home sales surprised to the upside from the previous month.

The yield on benchmark 10-year Treasury notes US10YT=RR last reached 3.1828% on Tuesday, compared with its U.S. close of 3.194% on Monday. The two-year yield US2YT=RR, which rises with traders’ expectations of higher Fed fund rates, touched 3.0934%.

Also, the dollar edged lower versus major rivals as investors weighed expectations on inflation and interest rate hikes. The dollar index =USD, which tracks the greenback against a basket of currencies of other major trading partners, was down at 103.96.

Gold was slightly higher with the spot priceXAU= trading at $1,825.79 per ounce.
Source: Reuters (Reporting by Julie Zhu; Editing by Sam Holmes)

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