Market Analytics and Technical Considerations
Key Points
On Wednesday, the focus shifted to Jerome Powell, the head of the U.S. Federal Reserve, whose speech later in the day will be the chief’s final chance to influence sentiment ahead of the Fed’s meeting in December. The rally in global equity markets occurred on Wednesday.
Some markets showed signs of a Santa rally early, with Asian shares expected to have their strongest month since 1998 and emerging market stocks expected to have their biggest month since 2009.
However, the dollar was set for its largest monthly loss in more than two decades, impacted by expectations of a near-term peak in U.S. interest rates.
At the Brookings Institution in Washington, Fed Chairman Powell will discuss the economy. Before the blackout period leading up to the Fed’s meeting on December 13–14, these are likely to be his final public comments on monetary policy.
We are unsure whether the markets are anticipating a turn, but we anticipate that he will emphasize that the Fed is far from reaching the end of its cycle of tightening.
Investors, on the other hand, placed their hopes on China’s faster reopening of the world’s second-largest economy, despite the disappointing business activity data and the escalation of protests in some parts of the country over strict COVID-19 lockdowns.
European stock markets increased, and U.S. equity futures indicated that Wall Street would get off to a strong start.
Over 1% of Asia-Pacific stocks outside of Japan were included in MSCI’s broadest gauge, which reached its highest level since September.I t was all set to be its best month ever.
Hong Kong’s Hang Seng File revitalized over 2%, in spite of the fact that Japan’s blue-chip Nikkei fell 0.2%.
After intense COVID lockdown moods, investors appeared to view protests in China as a catalyst for the economy opening up again. On Tuesday, Chinese officials announced that the country would accelerate the vaccination of elderly people against COVID-19.
China has not tightened its COVID approach and is continuing to fine-tune its policy, which is encouraging to investors despite the increase in cases and recent protests.
Expects a China returning, alongside an assumption that expansion and national bank financing costs might be near cresting, implied that November looked set to end as an extraordinary month for some business sectors.
This month, China property stocks are up 70%, making it their best month ever. Since the beginning of 2020, they had decreased by more than 80%.
Additionally, a rally in emerging markets was in full swing, with MSCI’s emerging market stock index reaching its highest level since May 2009 in November, up approximately 14%.
Investor sentiment could also be bolstered by preliminary November inflation data for the euro zone at 1000 GMT.
FED TALK Signs that U.S. inflation is peaking have helped government bond markets but hurt the strong dollar. This means that the Fed can slow down its aggressive rate hikes.
The yield on the 10-year Treasury of the United States decreased by 2.5 basis points to approximately 3.73 percent and has decreased by more than 30 basis points this month, putting it on track for its largest monthly decline since March 2020.
Although the unexpected slowdown in inflation is encouraging, it is only the first of a long list of conditions that the Fed must observe before suspending its hiking cycle.
We expect the Fed to take Fed Funds rates some 100 basis points higher than they are currently, just under 5%, before this is the case. Longer-term, the direction of travel is indeed toward lower inflation and an end to this tightening cycle.
The greenback’s performance against six major currencies is measured by the U.S. dollar index, which decreased 0.4% to 106.40.
It has lost around 4.3% in November, making this its greatest one-month drop since June 2010.
The yen and sterling were a little bit firmer on the day, while the euro was up 0.4 percent at $1.0373.
Oil prices increased elsewhere, with Brent crude futures rising 85 cents or 1 percent to $83.88 per barrel and WTI crude futures rising 0.5 percent to $78.58 per barrel.
