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LONDON: Hong Kong led a rally across stock markets Tuesday on hopes that China’s economic engine Shanghai will ease its weeks-long lockdown and gradually reopen businesses.

In foreign exchange, the pound leapt against the dollar as UK jobs data cemented expectations of more interest rate rises from the Bank of England despite growing fears of recession.

“Hopes that the Shanghai lockdowns will ease, along with the ensuing supply chain disruptions, have been enough to lift” equities, said OANDA analyst Jeffrey Halley.

Much of the city of 25 million has been under lockdown since April as Beijing attempts to stamp out an Omicron-fuelled virus surge under its strict zero-Covid policy.

Tuesday’s rally coincides with the third day in a row that Shanghai has recorded no Covid-19 cases outside of its quarantine facilities.

The impact of Beijing’s zero-Covid strategy on the world’s second-largest economy was revealed Monday when official data showed that retail sales and industrial production in April on-year had slumped to their lowest levels in more than two years.

World markets have also been roiled by surging inflation and Russia’s war in Ukraine – leaving investors jittery.

The British pound on Tuesday rallied more than one percent versus the dollar as traders bet that soaring UK inflation, lifted in part by wage rises, will see more monetary policy tightening by the Bank of England.

There are rising concerns that ongoing rapid interest rate rises by the BoE and other central banks including the Federal Reserve to curb decades-high inflation will push the economy into a downturn.

“Markets remain in fight or flight mode while rolling the dice on recession odds,” said Stephen Innes of SPI Asset Management.

On the corporate front Tuesday, India’s insurance giant LIC slumped on its market debut following the country’s biggest-ever initial public offering, closing nearly eight percent below the IPO price.

European shares flat after weak China data, miners limit fall

Prime Minister Narendra Modi’s government raised $2.7 billion by selling 3.5 percent of Life Insurance Corporation of India as his administration seeks to sell off state assets to bolster tattered public finances.

But it was forced to cut back the offer from a planned five percent after markets turned volatile following Russia’s invasion of Ukraine and China’s Covid lockdowns.

Elsewhere, Elon Musk said his planned purchase of Twitter would not go ahead unless he was assured that fewer than five percent of accounts on the platform were fake.

The Tesla owner has bid $44 billion for the social media platform.

Key figures at around 1100 GMT

London - FTSE 100: UP 0.9 percent at 7,533.42 points

Frankfurt - DAX: UP 1.5 percent at 14,175.62

Paris - CAC 40: UP 1.3 percent at 6,432.73

EURO STOXX 50: UP 1.6 percent at 3,743.23

Hong Kong - Hang Seng Index: UP 3.3 percent at 20,602.52 (close)

Shanghai - Composite: UP 0.7 percent at 3,093.70 (close)

Tokyo - Nikkei 225: UP 0.4 percent at 26,659.75 (close)

New York - Dow: UP 0.1 percent at 32,223.42 (close)

Brent North Sea crude: UP 0.7 percent at $114.98 per barrel

West Texas Intermediate: UP 0.7 percent at $115 per barrel

Euro/dollar: UP at $1.0519 from $1.0436 at 2030 GMT Monday

Pound/dollar: UP at $1.2465 from $1.2323

Euro/pound: DOWN at 84.41 pence from 84.67 pence

Dollar/yen: UP at 129.35 yen from 129.08 yen

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