Stocks rally on Powell, China Covid; dollar slides: markets wrap

Stocks extended gains in Asia after China appeared to soften is Covid stance and Federal Reserve chair Jerome Powell signalled a slowdown in the pace of interest-rate hikes.
The dollar fell against most of its G10 counterparts, with the yen speeding to a three-month high. Treasury yields stabilised after large declines on Powell’s comments.
US equity futures edged higher, contracts for Europe surged and the Hang Seng China Enterprises Index jumped as much as 3.7%, following a 29% gain in November. 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.
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.
Equities were buoyed 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 the return of some two-sided risk management. That is a big deal for equities and means an outsized move in stocks relative to the rates market is justified,” he said.
Optimism for tech stocks boosted US-listed blue chips on Nasdaq Golden Dragon China Index, which includes internet giants Alibaba, Tencent and Baidu.
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 showed a steep drop in US inventories.
Gold edged higher in Asia – following a 1% advance on Wednesday. BM/DM