2022 – Shanghai lifts lockdown, Eurozone CPI, EU summit

© Reuters

by Jeffrey Smith

Investing.com – The Memorial Day holiday in the United States means it’s a quiet session in global markets, but Chinese and European stocks rose after Shanghai announced it was lifting more COVID-19 lockdown 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 in the UK economy has finally – but only gradually – reached the housing market. Here’s what you need to know about the financial markets on Monday, May 30th.

1. Re-open Chinese

Shanghai is out of COVID-19 lockdown and announces the resumption of public transportation from June 1.

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

Restrictions on China’s main economic hub have been in place for more than two months and have led to a sharp collapse in domestic economic output and a renewed increase in global supply chain problems.

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

In response, Chinese stock indices rose 1.0%, while European indices rose slightly less.

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

The ban on Russian oil imports proposed by the European Union is still in effect.

The weekend of negotiations ahead of the two-day summit that began later on Monday failed to overcome Hungarian objections to a proposed import ban on crude and refined products that will come into effect at the end of the year, despite temporary exemptions for cross-border oil shipped. The southern branch of Druzhba, which feeds Hungary, Slovakia and the Czech Republic.

Accordingly, EU leaders will also sign a $10 billion financial aid package to Ukraine to keep their government afloat, as well as discuss measures to support Ukraine’s grain export to world markets.

Meanwhile, Russia is making steady strides on the battlefield in its effort to conquer the remaining unoccupied parts of eastern Ukraine. Ukrainian authorities have confirmed street fighting in Severodonetsk, the largest city in the still state-controlled Luhansk region.

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 eurozone’s largest economy, showed prices rising 0.9%-1.1%, versus a nationwide average of 0.8% in April, and despite expectations of a slowdown to 0.5%. A preliminary figure for the full data is due at 8 AM ET (1200 GMT).

In and, the price increase accelerated to 0.8%, bringing annual rates down to 8.7% and 9.0%, respectively.

In comments ahead of the data, the ECB’s chief economist told Cinco Dias that two 25 basis point increases in the ECB’s key rate this summer were better than a half point hike in July.

4. UK housing market weakens

The slowdown in the British economy has finally reached the housing market.

Data from online real estate agent Zoopla showed that the percentage of discounted home listings rose to 5% of the total in the past month. She said the average price reduction is around 10%. Homes also take longer to sell.

Zobla estimates that annual home price inflation slowed to 8.4% in April from 9.0% in March. It expects that to drop further to about 3% by the end of the year.

That still means home prices will hit new highs by then amid a chronic mismatch between supply and demand.

5. Oil prices rise amid expectations of a 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.

As of 6:30 AM ET, futures were up 0.4% at $115.47 a barrel, while futures were up 0.5% at $116.18 a barrel.

Data out of the US on Friday showed that long speculative interest in oil reached a two-month high last week as the prospect of a rebound in Chinese demand combined with prolonged supply constraints further tightens the market.