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European stocks hit record high in 2022 debut

European stock markets climbed to an all-time high in the first trading session of 2022, with oil prices and US stock futures also advancing after last year’s strong rally.

The region-wide Stoxx 600 index gained 0.7 per cent in afternoon dealings, with Germany’s Dax up 0.9 per cent and the Cac 40 in Paris rising 1.2 per cent. In Asia, South Korea’s Kospi climbed 0.4 per cent. Bourses in London, Japan and mainland China were closed for holidays.

Monday’s rise came after the Stoxx 600 closed out 2021 with a 22 per cent gain, a strong rebound from the 4 per cent fall the previous year, when the coronavirus crisis shook global markets. A flood of government and central bank stimulus, combined with the global economic recovery from the depths of the pandemic helped fuel the rise, analysts and investors said.

Gains in Europe’s markets were broad on Monday, with German airline Lufthansa, French aeroplane maker Airbus and Telecom Italia all notching up gains of greater than 2 per cent. Oil prices, meanwhile, rose on both sides of the Atlantic. Brent crude, the international benchmark, climbed 0.5 per cent to $78.20 a barrel, while US marker West Texas Intermediate rose 0.3 per cent to $75.45. Both surged about 50 per cent last year following sharp falls in 2020.

Even as stocks continued their ascent at the start of 2022, investors were starting the year with several risks bubbling in the background, said Karl Steiner, a strategist at Swedish bank SEB. Evergrande’s notice on Monday that it would again suspend its shares in Hong Kong injected “a bit of uncertainty”, Steiner added.

The property developer has been at the centre of a sector-wide crisis in the world’s biggest emerging markets for months. Hong Kong’s Hang Seng share index fell 0.5 per cent on Monday, with the property development sector off 1.1 per cent.

Mounting tensions between western countries and Russia have also caught investors’ attention, with US president Joe Biden warning that his country would act “decisively” should Russia invade Ukraine.

The spread of the highly transmissible Omicron strain of coronavirus, elevated global inflation and the removal of central bank stimulus measures are other factors that are looming large.

In the US, futures tracking the S&P 500 rose 0.6 per cent in early Chicago trading. The Wall Street benchmark rallied 27 per cent in 2021, marking the third straight year of double-digit gains.

Global government bonds came under slight selling pressure. Germany’s 10-year Bund yield rose 0.01 percentage points to minus 0.17 per cent, while the US equivalent inched up 0.03 percentage points to 1.53 per cent.

A survey on the US manufacturing sector, due for publication on Tuesday, along with the monthly jobs report on Friday, could provide further direction in the first trading week of the year.

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