Stocks, commodities jump as China drops quarantine rule

Stock markets gained on Tuesday after China said it would scrap its COVID-19 quarantine rule for inbound travellers - a major step in reopening its borders.

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.6%, outperforming an index of global shares, which rose 0.2%. China’s bluechip gained 1%.

The pan-European STOXX 600 index (.STOXX) rose 0.5%, tracking the rally in Asia, a small gain against the nearly 12% it has lost this year, as central banks’ aggressive monetary policy tightening has hit European equities hard, reported Reuters.

US stock futures, the S&P 500 e-minis, climbed 0.7%, indicating the market is set to rise as traders return to their terminals on Tuesday after the Christmas holiday.

Markets in some regions including London, Dublin, Hong Kong and Australia remain shut.

The value of bonds fell as yields, which move inversely to price, hit nine-week highs on Tuesday, with German two-year yields at their highest since 2008 to trade around 2.489%, while Italian bond yields rose 11 basis points to 4.622%.

European bond markets have yet to reach peak rates, with the European Central Bank (ECB) lagging behind the US Federal Reserve’s jumbo rate increases, according to Florian Ielpo, head of macro at Lombard Odier Investment Managers.

The broader picture looks bullish, he said, pointing to prices on credit spreads and in broader derivatives markets. The (.VIX), often seen as a gauge of risk aversion, has fallen 35% since the beginning of October, as investors have grown more confident about inflation having peaked.