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European shares climbed on Tuesday, tracking a global rally in equities after China further relaxed its Covid-19 curbs, raising hopes of a recovery in the world’s second-largest economy.
The pan-European STOXX 600 index (.STOXX) gained 0.4% to start the holiday-shortened week higher. China on Monday said it would drop its quarantine requirements for inbound visitors, further easing three-year border controls aimed at curbing Covid.
While London and Dublin markets remained closed for the Christmas holiday, most European bourses advanced in early trading, reported Reuters.
Chinese reopening and the in-line U.S. inflation data on Friday could provide a “minor boost to equity markets,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
However, rise in COVID-19 cases in China could “throw a shadow on the reopening glow,” Ozkardeskaya added.
China-exposed luxury firms LVMH (LVMH.PA) and Richemont (CFR.S) rose nearly 1.7% each.
Miners (.SXPP) and energy stocks (.SXEP) added 1.0% and 1.4%, respectively, according to Refinitiv data based on Thursday’s closing price, as commodity prices jumped on hopes of demand recovery in top consumer China. On the day, these sectors also rose.
Industrials (.SXNP) and banks (.SX7P) gained for a second straight session, lifting the broader European index. Traders and analysts said thin trading volumes also influenced market moves.
German companies expect only a mild recession next year despite headwinds from the energy crisis, raw material shortages and a tepid global economy, a Reuters survey showed. Shares in Germany (.GDAXI), Europe’s largest economy, gained 0.5%.
The European STOXX 600 index has lost nearly 12% so far this year, and is headed for its worst annual performance since 2018, on fears of economic recession due to aggressive monetary policy tightening by central banks globally.
