By Marc Jones

LONDON, (Reuters) – The 2022 world stock market got off to a positive start Monday, after their third consecutive year with double-digit gains. Meanwhile, the dollar, benchmark oil prices, and benchmark government bond yields made earlier moves higher.

London’s traders are enjoying the last day of Christmas rest. But mainland Europe had a vibrant start with the index setting a record for the first time after an influx of positive data from Eastern Europe and the Euro zone.

However, the Euro zone’s Manufacturing PMI dropped to 58.0 in December, from November’s 68.5. It was close to an initial “flash”, but still exceeded 50. This is what separates growth and contraction.

Joe Hayes from IHS Markit, who compiles PMI’s survey, said that “we are beginning to see some tentative but very encouraging signs that Europe’s supply chain crisis has begun to recede.”

Also, the data showed that firms saw their purchases increase at a record-breaking rate in December. The input price index fell to an 8-month record low. Even though it still remains high, factories were able to increase their prices more slowly.

Hayes said, “Increasing inflation rates are again welcome signs but we’re still hot territory.”

After trading closed, the bourses of France, Spain, Italy, and Germany rose between 0.8% to 1.1%. The benchmark for European borrowing costs, 10-year German bond yields, which are approximately 4.5% higher than November’s level, was also up. [/FRX]

Higher rates could have a positive impact on eurozone bank stocks by 1.2%, while the carmakers saw an increase of 1.8% following bullish targets set out for them by Tesla (NASDAQ;) and Hyundai.

LIRA

The eurozone data did not lift the euro, but currency traders remained focused on the potential rise in the dollar if the Federal Reserve raises U.S. rates several times this year as expected.

The year began with a rough start, when it plunged as high as 5%, before recovering partially after its central bank disclosed that more than $3Billion of its reserves had been used last month, just as the currency crashed to new records.

The statistics office of Turkey also revealed that the annual inflation rose to 36% in December, which was higher than anticipated. This is the highest level since September 2002.

“This shows a vicious cycle in demand-pull, which is dangerous because the central banking had implied that price pressure was caused by supply constraints, but it couldn’t make any changes to it,” Ozlem Derici Sengul (founding partner, Spinn Consulting, Istanbul) said.

After a remarkable last 18-20 month for many of them, the commodity markets quickly recovered.

Oil prices rose to $79 per barrel Monday due to tight supplies and expectations of further demand recovery by 2022, partly supported in part by the view that Omicron coronavirus variant will not shut down the global economic system again. [O/R]

OPEC+ and its allies are expected not to change their plan of gradually increasing output at a meeting that takes place on Tuesday.

The price of crude oil, which rose 50% in 2017 and has risen 80% since the COVID-triggered lows at 2020, rose 1.3% to $78.86 per barrel. U.S. West Texas Intermediate crude (WTI), increased $1.03, or 1.4% to $76.24.

According to Tamas Varga, an oil broker PVM, “Infection rates have risen globally,” she said.