Must read: FTSE 100 lifted by China-sensitive stocks after Hang Seng surges

Our head of investment Victoria Scholar comments on the Bank of England interest rate hike, the Hang Seng index, and the latest US non-farm payrolls report.

EUROPEAN MARKETS

European markets have opened mixed with the FTSE 100 staging gains. China-sensitive stocks listed on the UK index such as Prudential (LSE:PRU), Rio Tinto (LSE:RIO) and Anglo American (LSE:AAL) are outperforming on the back of the Hang Seng’s overnight surge.

The Bank of England’s Catherine Mann warned that there ‘still is a lot of momentum’ when it comes to the domestic drivers of inflation. It comes after the central bank raised its benchmark interest rate by the most since 1989 to 3% despite warning of the longest recession in a century. It was the eighth consecutive interest rate increase.

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However, the pound fell sharply after Governor Andrew Bailey said rates ‘will have to go up by less than currently priced into financial markets.’ Cable (GBPUSD) is recovering some lost ground this morning, trading around $1.12 and is down by almost 3.5% this week with pressures on both sides of the ledger after messaging from the Fed on Wednesday drove the greenback higher mid-week.

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HANG SENG

The Hang Seng in Hong Kong has rallied by more than 5% overnight with the Hang Seng property and tech indices surged by more than 10% at one stage. The HSI logged its best weekly gain since November 2011 amid speculation that some of China’s strict Covid rules that have sharply weighed on its economy could be set to ease in the coming months. So far, the speculation is only based on social media rumours with China’s foreign ministry commenting that it is not aware of the issue. However, this has been enough to help lift risk appetite for stocks in Hong Kong and on the mainland with the Shanghai Composite enjoying its best weekly gain in over two years. Also adding to the bullish sentiment was a report from Bloomberg suggesting that US officials were content after an audit inspection of US-listed Chinese companies, alleviating some tensions between the two superpowers.

The positive momentum is driving China-sensitive London-listed stocks such as Rio Tinto Registered Shares (LSE:RIO) and Prudential (LSE:PRU) to the top of the FTSE 100 this morning.

US JOBS REPORT

Trader attention shifts to October’s US jobs report at lunchtime with non-farm payrolls expected to hit +195,000 slowing from +263,000 in the previous month. The unemployment rate is also expected to deteriorate slightly from 3.5% in September to 3.6% this month. However, previous labour market data this week topped expectations with the ADP private employment report on Wednesday coming in at +239,000 and the US JOLTS job openings rising to 10.7 million in September versus forecasts for 10 million, suggesting that the Fed’s aggressive rate-hiking path is yet to have a notable cooling impact on the jobs market. The US dollar is on track to log its best week in over a month after the Fed warned US rates will peak above expectations and carried out another aggressive interest rate increase.