Asian stocks boosted by Fed’s dovish rate-hike stance
US Federal Reserve chair Powell says the central bank could scale back the pace of interest-rate hikes ‘as soon as December’
01 December 2022 - 08:10
byAnkur Banerjee
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Singapore — Asian equities jumped on Thursday, while the dollar slid as investors poured into risky assets after Federal Reserve chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.
In an eagerly awaited speech, Powell said the central bank could scale back the pace of its interest-rate hikes "as soon as December", but cautioned that the fight against inflation was far from over.
Powell’s comments at the Brookings Institution in Washington sent Wall Street equities soaring, while the US dollar and treasury yields fell.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2% in early Asian trade. The index posted its biggest monthly gain in nearly 30 years in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-basis-point (bps) increases. But the index was still down about 17.5% on the year.
Japan’s Nikkei opened 1% higher, while Australia’s S&P/ASX 200 index rose 0.85%. E-mini futures for the S&P 500 rose 0.20%.
ING regional head of research Robert Carnell said it will be very hard now for the Fed to push back against market expectations for a slowdown in rate hikes.
"It looks as if Fed chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech," he said.
"So let’s hope that inflation does keep on falling, or this may look like a missed opportunity."
Markets are currently pricing in a 91% probability that the Fed will increase rates by 50 bps on December 14, and see a 9% chance of another 75 bps hike.
Mainland China stocks opened up 1.2% and Hong Kong shares rose 2.5% in early trade after they closed higher on Wednesday following the easing of Covid-19 measures in Guangzhou city.
China’s factory activity shrank in November as widespread curbs disrupted manufacturers’ output, a private sector survey showed on Thursday, weighing on employment and economic growth in the third quarter.
US treasury yields fell after Powell’s comments and remained lower Thursday. The yield on 10-year treasury notes was down 8.3 bps at 3.618%, while the yield on the 30-year treasury bonds was 6.8 bps lower at 3.755%.
The two-year US Treasury yield, which typically moves in step with interest-rate expectations, was down 5.2 bps at 4.321%.
The safe-haven dollar also lost its footing, with the dollar index — which measures the currency against six major peers including the yen and euro — extending Wednesday’s more than 1% drop into Thursday, dipping as low as 105.69.
The Japanese yen strengthened 1.02% versus the greenback at 136.65 per dollar, while sterling was last trading at $1.2086, up 0.25% on the day.
In commodity markets, gold prices climbed to a two-week high in early Asian trade on Thursday. Spot gold added 0.5% to $1,776.95 an ounce, while US gold futures gained 1.73% to $1,776.20 an ounce.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Asian stocks boosted by Fed’s dovish rate-hike stance
US Federal Reserve chair Powell says the central bank could scale back the pace of interest-rate hikes ‘as soon as December’
Singapore — Asian equities jumped on Thursday, while the dollar slid as investors poured into risky assets after Federal Reserve chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.
In an eagerly awaited speech, Powell said the central bank could scale back the pace of its interest-rate hikes "as soon as December", but cautioned that the fight against inflation was far from over.
Powell’s comments at the Brookings Institution in Washington sent Wall Street equities soaring, while the US dollar and treasury yields fell.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2% in early Asian trade. The index posted its biggest monthly gain in nearly 30 years in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-basis-point (bps) increases. But the index was still down about 17.5% on the year.
Japan’s Nikkei opened 1% higher, while Australia’s S&P/ASX 200 index rose 0.85%. E-mini futures for the S&P 500 rose 0.20%.
ING regional head of research Robert Carnell said it will be very hard now for the Fed to push back against market expectations for a slowdown in rate hikes.
"It looks as if Fed chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech," he said.
"So let’s hope that inflation does keep on falling, or this may look like a missed opportunity."
Markets are currently pricing in a 91% probability that the Fed will increase rates by 50 bps on December 14, and see a 9% chance of another 75 bps hike.
Mainland China stocks opened up 1.2% and Hong Kong shares rose 2.5% in early trade after they closed higher on Wednesday following the easing of Covid-19 measures in Guangzhou city.
China’s factory activity shrank in November as widespread curbs disrupted manufacturers’ output, a private sector survey showed on Thursday, weighing on employment and economic growth in the third quarter.
US treasury yields fell after Powell’s comments and remained lower Thursday. The yield on 10-year treasury notes was down 8.3 bps at 3.618%, while the yield on the 30-year treasury bonds was 6.8 bps lower at 3.755%.
The two-year US Treasury yield, which typically moves in step with interest-rate expectations, was down 5.2 bps at 4.321%.
The safe-haven dollar also lost its footing, with the dollar index — which measures the currency against six major peers including the yen and euro — extending Wednesday’s more than 1% drop into Thursday, dipping as low as 105.69.
The Japanese yen strengthened 1.02% versus the greenback at 136.65 per dollar, while sterling was last trading at $1.2086, up 0.25% on the day.
In commodity markets, gold prices climbed to a two-week high in early Asian trade on Thursday. Spot gold added 0.5% to $1,776.95 an ounce, while US gold futures gained 1.73% to $1,776.20 an ounce.
Reuters
Asia stocks wobble as China’s manufacturing activity contracts
Asia shares rally as speculation on China swirls
JSE set to open to higher Asian markets as traders await Powell’s speech
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.