(Bloomberg) — European and US stock futures rose with Asian equities on Thursday after China appeared to soften its Covid stance and Federal Reserve Chair Jerome Powell signaled a slowdown in the pace of interest-rate hikes.
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The dollar fell against its Group-of-10 counterparts, with the yen speeding to a three-month high. Treasury yields stabilized after large declines following Powell’s comments.
Euro Stoxx 50 contracts climbed more than 1%, as did benchmark share indexes for Hong Kong and mainland China. A gauge of Asian stocks advanced further after its best month in 24 years. The S&P 500 soared on Wednesday to end the month at the highest level since mid-September, led by a rally led by tech stocks.
Sentiment in Asia got an extra China’s top official in charge of the fight against the coronavirus. Vice Premier Sun Chunlan said the country’s efforts to combat the virus are entering a new phase with the omicron variant weakening and more Chinese getting vaccinated. Beijing also indicated some Covid patients could isolate at home.
Powell’s remarks affirmed expectations the Federal Reserve will raise interest rates 50 basis points this month in a departure from a run of four 75 basis point hikes. Pricing in the swaps market indicates the Fed funds rate will peak below 5% in May. Prior to Powell’s comments, the market anticipated a peak above that level occurring in June.
“The markets were leaning towards another hawkish Powell speech and that was proven wrong,” said Christy Tan, Asia-Pacific investment strategist for Franklin Templeton Institute, in an interview with Bloomberg Television. The rally, however, may be premature, she added. “The market is second-guessing the Fed while the Fed is looking at data.”
Krishna Guha, head of central bank strategy for Evercore ISI, noted a broadening in Powell’s rhetoric beyond tackling inflation to supporting the economy. “Powell’s remarks embraced the return of some two-sided risk management,” he said. “That is a big deal for equities.”
Others were more skeptical about the driver behind the market moves and pointed to the possibility month-end portfolio positioning had amplified the price action.
Traders also scoured several economic reports, with key gauges of US activity painting a mixed third-quarter picture. Job openings fell in October — a hopeful sign for the Fed as it seeks to curb demand.
The figures precede Friday’s jobs report, which is currently forecast to show employers added 200,000 workers to payrolls in November. Economists are expecting the unemployment rate to hold at 3.7%, and for average hourly earnings to moderate.
Elsewhere in markets, oil fluctuated after three days of gains on China’s Covid developments and data showing a steep drop in US inventories.
Gold advanced in Asia following a 1.1% advance 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 speaks, Thursday
US unemployment, nonfarm payrolls, Friday
ECB’s Christine Lagarde speaks, Friday
Some of the main moves in markets:
Stocks
Futures on the S&P 500 rose 0.2% as of 6:49 a.m. London time. The S&P 500 gained 3.1%
Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 4.6%
Japan’s Topix benchmark rose less than 0.1%
The Hang Seng Index rose 1.4%
The Shanghai Composite Index rose 0.5%
Euro Stoxx 50 futures rose 1.2%
Currencies
The Bloomberg Dollar Spot Index fell 0.5%
The euro rose 0.5% to $1.0454
The Japanese yen rose 1.2% to 136.35 per dollar
The offshore yuan fell 0.2% to 7.0589 per dollar
The British pound rose 0.4% to $1.2110
Cryptocurrencies
Bitcoin rose 0.1% to $17,129.22
Ether fell 0.9% to $1,285.18
Bonds
The yield on 10-year Treasuries advanced one basis point to 3.61%
Japan’s 10-year yield was little changed at 0.25%
Australia’s 10-year yield declined five basis points to 3.48%
Commodities
West Texas Intermediate crude fell 0.5% to $80.15 a barrel
Spot gold rose 0.8% to $1,783.21 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Rita Nazareth.
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