Stocks Soar on US Inflation, China's Quarantine Ease: Markets Overview

(Bloomberg) — Global stocks extended gains as China’s easing of Covid curbs added fuel to a rally that began on Wall Street after slower-than-expected U.S. inflation data.

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U.S. and European stock futures rose, while benchmark Asian shares headed for their biggest gain in more than two years.

The gauge of Hong Kong-listed technology shares rose as much as 10% after China reduced the number of time travelers and close contacts they have to spend in quarantine. The key point came after leaders in Beijing called for more precise and targeted virus control measures.

Bloomberg’s gauge of the greenback resumed its slide on Friday, adding to Thursday’s 2% drop, its biggest move since 2009. The yuan strengthened, along with emerging market currencies.

Commodities from oil to iron ore and copper jumped on the Covid shift in China on hopes of a recovery in demand in the world’s second largest economy.

Cryptocurrency prices edged lower on Friday as the fallout from FTX continued even as other risk assets rallied following US inflation data and news from China.

Government bonds rose in Australia and New Zealand after Treasuries jumped on Thursday in a move that sent yields down 20 to 30 basis points on the U.S. curve. After the US consumer price data, interest rate traders cut the odds of another three-quarter point increase by the Federal Reserve in December to almost zero.

Headline US inflation hit 7.7%, the lowest since January, before Russia’s war in Ukraine boosted commodity prices. More importantly for the Fed, the key measure that excludes food and energy slowed more than expected.

“Touch wood, we can say goodbye to 75 basis point hikes as long as the inputs allow it, but with inflation likely to remain high, I suspect we will see rates above 5% next year,” said Matthew Simpson, Senior Market Analyst at StoneX Financial. “And the Fed will want more data before hinting at a lower final rate, even if markets behave like rates were cut overnight.”

Still, Thursday’s intense rally only partially offset the steep losses for risk assets caused this year by the Federal Reserve’s tightening. The S&P 500 is still down 17% and the Nasdaq 100 is down nearly 30%, both heading for their worst years since 2008. The MSCI World Index is down about 18% this year.

Fed officials appear to favor tapering interest rate hikes after a run of four major hikes. They also stressed the need for the policy to remain strict.

Dallas Federal Reserve President Laurie Logan said it may soon be appropriate to slow down to better assess economic conditions. Mary Daly of San Francisco said the moderation was “good news” but noted that “the pause is not the discussion, the discussion is being withdrawn.”

Key events this week:

Some of the major moves in the markets:

Stock up

  • S&P 500 futures were up 0.7% at 6:49 a.m. in London. S&P 500 up 5.5%

  • Nasdaq 100 futures rose 0.9%. Nasdaq 100 up 7.5%

  • Japan’s Topix index rose 2.1%

  • Hong Kong’s Hang Seng index rose 7.3%

  • China’s Shanghai Composite rose 1.7%

  • Australia’s S&P/ASX 200 rose 2.8%

  • Euro Stoxx 50 futures rose 0.9%

Currencies

  • The Bloomberg Dollar Spot Index fell 0.3%

  • The euro was little changed at $1.0213

  • The Japanese yen fell 0.5 percent to 141.70 per dollar

  • The offshore yuan rose 0.7% to 7.1035 per dollar

Cryptocurrencies

  • Bitcoin fell 3.2% to $17,230.76

  • Ether fell 4.4% to $1,262.94

Bonds

  • The yield on the 10-year Treasury note fell 28 basis points to 3.81% on Thursday. Trading was closed for Bank Holiday Friday

  • Australia’s 10-year bond yield fell six basis points to 3.65%

Goods

This story was created using Bloomberg Automation.

–With assistance from Georgina McKay, Steven Kirkland and Masaki Kondo.

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