(Bloomberg) — Stocks extended gains in Asia after China appeared to soften its stance on Covid and Federal Reserve Chairman Jerome Powell signaled a slowdown in the pace of interest rate hikes.
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The dollar edged lower against most of its Group of 10 peers, with the yen accelerating to a three-month high. Treasury yields stabilized after big drops following Powell’s comments.
U.S. stock futures were mixed, while European contracts rose. Benchmarks in Hong Kong and mainland China traded more than 1 percent higher. The index of Asian shares advanced further after its best month in 24 years in November. The S&P 500 jumped on Wednesday to end the month at its highest level since mid-September, led by a rally led by technology stocks.
Sentiment in Asia got an additional top China official in charge of fighting the coronavirus. Vice Premier Sun Chunlan said the country’s efforts to fight the virus are entering a new phase with the weakening of the omicron variant and more Chinese getting vaccinated.
Powell’s remarks confirmed expectations that the Federal Reserve will raise interest rates by 50 basis points this month, breaking a streak of four 75 basis point hikes. Pricing in the swaps market indicates that the Fed funds rate will peak below 5% in May. Before Powell’s comments, the market had expected a peak above that level in June.
Stocks were boosted by Powell’s indication that the Fed would balance tackling inflation with supporting the economy, said Krishna Guha, head of central bank strategy for Evercore ISI.
“Most importantly for risk assets, Powell’s remarks embraced a return to some bilateral risk management.” This is a big deal for the stock and means that the stock’s excessive move relative to the interest rate market is justified,” he said.
Others were more skeptical about the driving force behind the market moves and pointed to the possibility that month-end portfolio positioning may have boosted price action.
Traders also scrutinized several economic reports, with key indicators of US activity painting a mixed picture for the third quarter. Vacancies fell in October, an encouraging sign for the Fed as it seeks to curb demand.
The figures come ahead of Friday’s jobs report, which is currently forecast to show employers added 200,000 workers to payrolls in November. Economists expect the unemployment rate to hold at 3.7% and average hourly earnings to decline.
Elsewhere, oil was mixed after three days of gains on Covid developments in China and data showing a sharp drop in US inventories.
Gold rose in Asia – after a rise of 1.1% on Wednesday.
Key events this week:
- S&P Global PMIs, Thursday
- US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday
- BOJ’s Haruhiko Kuroda spoke Thursday
- US unemployment, non-farm payrolls, Friday
- Christine Lagarde of the ECB speaks, Friday
Some of the major moves in the markets:
Stock up
- S&P 500 futures were up 0.2 percent as of 2:01 p.m. in Tokyo. S&P 500 gained 3.1%
- Nasdaq 100 futures rose 0.1%. Nasdaq 100 up 4.6%
- The Topix rose 0.2%
- Australia’s S&P/ASX 200 rose 0.9%
- The Hang Seng rose 1.5%
- The Shanghai Composite rose 0.7%
- Euro Stoxx 50 futures rose 1.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.4%
- The euro rose 0.3% to $1.0439
- The Japanese yen rose 1 percent to 136.67 per dollar
- The offshore yuan fell 0.2 percent to 7.0578 per dollar
Cryptocurrencies
- Bitcoin rose 0.2% to $17,143.35
- Ether fell 1% to $1,284.19
Bonds
Goods
- West Texas Intermediate crude fell 0.2% to $80.41 a barrel
- Spot gold rose 0.6% to $1,779.91 an ounce
This story was created using Bloomberg Automation.
–Courtesy of Rita Nazareth.
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