Asian Stocks Join Global Rally as Dollar Falls on Fed Rate Cheer – Digital Journal

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Hong Kong led the rally in Asia after Jerome Powell’s dovish speech and hoping for an easing of China’s Covid policy – Copyright AFP DALE DE LA REY

Asian stocks extended a global rally on Thursday and the dollar fell after Federal Reserve chief Jerome Powell signaled a slowdown in the pace of interest rate hikes and China led the way for a softer approach in the fight against covid.

A growing sense of hope that months of sharp monetary tightening around the world are finally reining in inflation from its decade highs sent stocks higher in November, even as policymakers warned more work was needed.

And in a highly anticipated speech on Wednesday, Powell said the full effects of the Fed’s belt tightening had not yet been felt, but “it makes sense to moderate the pace of our rate hikes as we get closer to the dovish level.” That will be enough to reduce inflation.

He noted that the December meeting would likely see officials raise borrowing costs by 50 basis points, having raised them by 75 points in the last four meetings.

However, he said policy would have to stay tight “for some time” to restore price stability, echoing comments from other Fed officials who suggested there might not be cuts until 2024.

Analysts said the reaction to Powell’s comments, expected to be the most dovish in a long time, highlighted a sense of relief among investors that a long-awaited turnaround was on the cards.

All three major Wall Street indexes rose, with the Nasdaq leading as rate-sensitive tech companies soared.

The gains extended the November rally and helped recoup more of the steep losses suffered through much of 2022.

The dollar was also undergoing a sell-off, having rallied across the board this year as the Fed’s monetary policy diverged further and further from that of other central banks.

Investors were “putting those nasty thoughts of a bear market aside as December’s Santa Rally comes to life,” said Stephen Innes of SPI Asset Management.

“Indeed, investors are basking in the glow of dovish signals from the Fed. And with the Fed ending the giant raises, it is apparently enough to bottom out in the bear market and could lead to a rally. sustainable”.

He added that bets on rates above 5 percent were fading and that the advance in markets could jumpstart the new year, with another slowdown in November inflation that could fuel a rally higher, when a market rises 20 percent. from its recent low.

“Still,” he warned. “Inflation will have to play along.”

In another sign of hope, earlier data showed eurozone inflation eased for the first time in 17 months in November.

Hong Kong led gains in Asia again, with tech giants Alibaba and Tencent tracking massive gains in their US-listed shares, while Shanghai was also well up.

Those rallies were also aided by signs that China is moving closer to a more pragmatic approach to fighting the coronavirus, having battered the economy this year with its strict Covid-zero strategy of lockdowns and mass testing.

After widespread riots against the measures, and calls for more political freedoms, the authorities have announced measures aimed at relaxing some restrictions.

On Wednesday, Vice Premier Sun Chunlan, who heads China’s Covid campaign, told the National Health Commission that the fight was entering a new phase as Omicron weakens and more people are vaccinated.

Bloomberg News also noted that he did not refer to “dynamic zero covid,” the term used to explain Beijing’s strategy.

“It is clear that the authorities are setting the stage for the covid measures to be relaxed,” said Justin Tang of United First Partners. “Stock prices will see a boost as China joins the rest of the world in living with Covid.”

– Key figures around 0300 GMT –

Tokyo – Nikkei 225: UP 1.1 percent to 28,281.04 (pause)

Hong Kong – Hang Seng Index: UP 1.5 percent to 18,875.14

Shanghai Composite: UP 0.9 percent to 3,180.22

Euro/Dollar: UP to $1.0426 from $1.0408 on Wednesday

Dollar/yen: DOWN to 136.75 yen from 138.03 yen

Pound/Dollar: UP to $1.2081 from $1.2052

Euro/pound: DOWN to 86.32 pence from 86.34 pence

West Texas Intermediate: FLAT at $80.55 per barrel

Brent North Sea crude: DOWN 0.1 percent at $86.89 a barrel

New York – Dow: UP 2.2 percent to 34,589.77 (close)

London – FTSE 100: UP 0.8% to 7,573.05 (close)

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