Stocks Buoyed by Powell and China; Dollar Drops: Markets Wrap

(Bloomberg) — Global stocks extended gains on Thursday and the dollar slipped to a three-month low, after fresh signs emerged of a softening in China’s Covid stance and Federal Reserve Chair Jerome Powell confirmed the pace of interest rate hikes was set to slow.

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Europe’s Stoxx 600 index rose as much as 1.1%, while a gauge of global shares touched a three-month high. US equity index futures were little changed, a day after Powell’s comments lifted the rate-sensitive Nasdaq by 4.5% and helped the S&P 500 close out November with a second month of gains for the first time in more than a year.

“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, said on Bloomberg Television. The rally, however, may be premature, she added. “The market is second-guessing the Fed while the Fed is looking at data.”

Sentiment in Asia got an extra boost after 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.

The buoyant mood knocked the dollar lower against its Group-of-10 counterparts for the third straight day, while Treasury 10-year yields stayed just off two-month lows hit in the wake of Powell’s comments. The yen advanced more than 1%.

Powell’s remarks confirmed 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.

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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.

Those jobs 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.

Investors will likely switch focus to how economic growth will fare in coming quarters. Thursday’s PMI numbers from S&P Global showed a slump in Asian factory activity and businesses bracing for more cutbacks in spending from US and European customers.

Recession fears may damp sentiment toward oil, with prices fluctuating after China’s Covid developments fueled three days of gains.

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

• The Stoxx Europe 600 rose 0.7% as of 8:31 a.m. London time

• Futures on the S&P 500 were little changed

• Futures on the Nasdaq 100 were little changed

• Futures on the Dow Jones Industrial Average were little changed

• The MSCI Asia Pacific Index rose 1.6%

• The MSCI Emerging Markets Index rose 0.8%

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%

• The euro was little changed at $1.0414

• The Japanese yen rose 1.2% to 136.48 per dollar

• The offshore yuan fell 0.4% to 7.0771 per dollar

• The British pound rose 0.3% to $1.2097

Cryptocurrencies

• Bitcoin fell 0.1% to $17,082.75

• Ether fell 1.3% to $1,279.96

Bonds

• The yield on 10-year Treasuries advanced three basis points to 3.63%

• Germany’s 10-year yield declined six basis points to 1.87%

• Britain’s 10-year yield declined seven basis points to 3.09%

Commodities

• Brent crude was little changed

• Spot gold rose 0.4% to $1,776.22 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth.

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