Shanghai lifts lockdown, eurozone CPI, EU summit

© Reuters

by Jeffrey Smith – The Memorial Day holiday in the United States means a quiet session in global markets, but Chinese and European stocks rose after Shanghai announced the lifting of more COVID-19 containment measures. Eurozone inflation appears to have exceeded expectations in May, but the European Central Bank’s chief economist again ruled out a half-point rate hike in July. European Union leaders are due to meet later but are struggling to overcome Hungary’s objections to a proposed ban on Russian oil imports starting from the end of the year. The weakness of the British economy has finally – but only gradually – reached the housing market. Here’s what you need to know in the financial markets on Monday, May 30th.

1. Re-opening of the Chinese Stock Exchange

Shanghai is emerging from COVID-19 lockdown again, announcing the resumption of public transportation services from June 1.

City authorities also said that restrictions on private cars will be lifted and traffic will also be allowed in and out of residential communities from the same date – except for apartment complexes located in medium and high risk areas and other designated control areas.

The restrictions on China’s most important economic hub have been in place for more than two months and have caused a sharp decline in domestic economic output and a new rise in global supply chain problems.

Authorities in the capital, Beijing, said the COVID-19 outbreak was also under control, after a week of persistently declining case numbers.

Benchmark Chinese stock indices rose 1.0% in response, while European benchmarks rose slightly less.

2. The European Union is rushing to save the Russian oil embargo

A proposed European ban on Russian oil imports is still far from a final agreement.

The weekend of negotiations leading up to the two-day summit starting on Monday failed to overcome Hungarian objections to a proposed ban on imports of crude and refined products that will take effect at the end of the year, despite the inclusion of temporary oil waivers. It is delivered through the southern arm of Druzhba, which supplies Hungary, Slovakia and the Czech Republic.

According to Reuters, European leaders will also approve $10 billion in financial aid for Ukraine to keep its government working and discuss measures to facilitate the export of Ukrainian grain to world markets.

Meanwhile, on the battlefield, Russia continues to make steady progress in its efforts to seize the last unoccupied parts of eastern Ukraine. Ukrainian authorities have confirmed street fighting in Severodonetsk, the largest city in the Luhansk region still under government control.

3. Eurozone inflation surprises to the upside

Inflation may have peaked in the US, but it still appears to be accelerating in the Eurozone.

Preliminary data from Germany, the euro zone’s largest economy, shows prices rising 0.9% to 1.1%, against a national average of 0.8% in April, and against expectations of a slowdown to 0.5%. A preliminary figure for all of Germany is expected at 2 pm.

In and, price increases accelerated to 0.8%, bringing annual rates to 9.0%, respectively.

In comments ahead of the data, ECB Chief Economist Philip Lane told Cinco Dias that two 25 basis point increases in the ECB’s key rate this summer were better than the half basis point increase in July.

4. The UK property market is weakening

The slowdown in the British economy is finally hitting the housing market.

Data from online real estate agent Zoopla showed that the percentage of discounted housing listings over the past month was 5% of the total. The agency notes that the average drop in prices is around 10%. Homes also take longer to sell.

Zoopla estimates that annual home price inflation slowed to 8.4% in April from 9% in March. It expects to decline further to about 3% by the end of the year.

This means that real estate prices will reach new heights by then, amid a chronic mismatch between supply and demand.

5. Oil rises on expectations of recovery in Chinese demand

Crude oil prices rose in response to the news from China, paving the way for a rebound in demand from the world’s largest importer.

By 1:10 pm, oil futures were up 0.4% at $115.47 a barrel, while oil futures were up 0.5% at $116.18 a barrel.

Data from the United States on Friday showed that long-term speculative interest in oil reached a two-month high last week, as the prospect of rebounding demand from China, along with insufficient supply, narrowed the market further.

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