European stocks climb as easing China curbs boost risk sentiment

Bloomberg

European equities rose to the highest level in more than three weeks, trimming their monthly drop, after China relaxed some of the strictest virus controls of the pandemic, fuelling risk-on sentiment for economic recovery.
The Stoxx 600 advanced 0.7% at 9:44 am in London, rising for a fourth day in the longest winning streak since March. Consumer and technology sectors were among the biggest gainers.
European stocks have been under pressure this year amid a flurry of concerns spanning hawkish central banks, slowing growth, soaring prices and the war in Ukraine. Dip buyers stepped into the market last week as cheaper valuations and still robust earnings outlooks fuelled appetite for equities.
Adding to positive sentiment, Chinese authorities relaxed some Covid-19 restrictions and moved to stimulate country’s faltering economy.
A reopening of China’s economy would lead to fewer economic concerns through easing supply bottlenecks and cooling commodity prices, according to Ulrich Urbahn, head of multi-asset strategy and research at Berenberg.
The equity rally can continue if volatility declines further and inflation surprises to the downside, he said. “The risk remains that inflation is stickier than many investors think,”
Urbahn said.
Spanish inflation unexpectedly quickened in May, denting hopes that the euro zone’s record price surge is peaking and piling more pressure on the European Central Bank to act. The ECB debate over how aggressively to tighten monetary policy is likely to intensify this week among officials whose window to speak out before the June 9 decision will close on Thursday.
“The peak in European inflation is likely to be later than the March peak of the US,” said Paul Donovan, chief economist at UBS Global Wealth Management. “The year-over-year inflation rate says as much about last year’s price level as it does about this year’s price level, and Europe’s later reopening means prices are still being compared to a lockdown economy.”
Among individual movers, Telecom Italia SpA jumped after reaching a preliminary deal with state-backed lender Cassa Depositi e Prestiti SpA for a national single-network project. Sanofi slipped after its plans to make its well-known erectile dysfunction drug Cialis available without prescription in the US were put on hold on Monday.
Meanwhile, Bitcoin posted its biggest gain in two weeks, climbing close to $31,000 as China’s easing of Covid-19 curbs stoked investor enthusiasm for riskier assets.
The largest cryptocurrency advanced as much as 5.8% to $30,858.53 on Monday morning in London. Ether and smaller tokens like Avalanche, which got pummeled last week even as Bitcoin held relatively steady, also gained. Stocks advanced in Asia and Europe after the S&P 500 rallied.
Cryptocurrencies re-established their tendency to trade in tandem with equities after falling even as the S&P 500 capped a weekly advance of 6.6%. That sparked concerns that investors would continue dumping digital tokens even amid a revival in demand for other risk assets.