China tech stocks rip as US delisting risk fades

After a mildly positive close on Wall Street on Friday, European bourses are set for a modestly stronger start.

•         Tech stocks rise in Asia after Beijing reduces red tape to help Chinese stocks stay listed in US
•         Peace talks are set to continue, and Germany warns more sanctions are coming
•         Oil edges back towards $100 on persistent supply concerns

US non-farm payroll showed that 431k jobs were added in March; while this was short of forecasts, the February figure was revised 72k higher to 750k. Unemployment fell to 3.6%, and wages grew a higher than expected 5.6%. The data showed that the US jobs market continued to tighten in March, strengthening the Fed’s resolve to raise interest rates to rein in 40-year high inflation.

Asia traded cautiously higher overnight, although Chinese markets were closed for a bank holiday. Shanghai is in complete lockdown, and reports of a new subtype of Omicron have emerged. Even so, technology stocks in Asia received a boost after China’s Securities Regulatory Commission modified rules which could allow the US access to full audits reducing the likelihood of Chinese firms losing their US listings.

Heading towards the European open, Russian Ukraine developments remain in focus with the prospect of more sanctions. Over the weekend, Germany said that the West would agree on further sanctions on Russia after Ukraine accused Russia of war crimes following a massacre in Bucha. Russia’s defense ministry has denied this. There appears to be growing momentum to seriously discuss an embargo on Russian energy imports, which could come at a hefty price given Germany’s reliance on Russian energy for around 40% of its supply.

EUR/USD

While European stocks are pointing higher, the Euro is trading lower on the prospect of more sanctions, trading below 1.1050 versus the US dollar. EUR/USD booked gains of 0.65% last week as inflation in the eurozone hit a record high of 7.5%, fuelling bets of a more hawkish ECB.

Oil

Oil prices are edging higher on Monday after shedding 12% across last week in the biggest weekly decline since 2020. Concerns over tight supply persist despite the US announcing the release of strategic reserves. While the US said it would release 1 million barrels per day, this is still well below the 1 to 3 million barrels per day of Russian supply, which are absent from the market amid Western sanctions. So while the move is serving to calm supply shortfalls, this is not a long-term solution.

Separately demand in China, the world’s largest oil importer, is expected to remain under pressure amid the Shanghai lockdown.

Looking ahead

Eurozone producer prices are set to rise by an eye-watering 27%, which could pile pressure on the ECB to adopt a more hawkish stance, which could lift the euro. Investor sentiment data is expected to show a deterioration again in April amid the ongoing war and rising prices. The Sentix investor confidence data is forecast to decline to -9.7 in April, down from -7.

The US economic calendar is relatively quiet, with just US factory orders, which are expected to fall -0.6% in February after rising 1.4% in January.