- Fed’s Waller downplays CPI as a single number
- Beijing outlines ownership support and COVID steps
- Biden meets China’s Xi at G20
- Limited fallout for other assets during FTX collapse
LONDON, Nov 14 (Reuters) – Stocks stabilized and bond yields remained near multi-year highs on Monday after U.S. and European central bankers urged caution as they struggled to rein in inflation via rate hikes. rate, without strangling growth.
US Federal Reserve Governor Christopher Waller on Sunday warned investors against getting carried away by a single data point showing signs of success in fighting inflation, saying it would take a series of moderate reports for the bank to release its brakes.
A slight drop in US inflation had seen two-year Treasury yields plunge 33 basis points for the week and the dollar lose almost 4% – the fourth biggest weekly drop since the start of the rate era. floating exchange rates more than 50 years ago.
Waller added that markets were well ahead of themselves on a single inflation print, although he admitted the Fed may now be starting to think about rising at a slower pace.
Two-year yields fell slightly to 4.39%, after plunging as low as 4.29% on Friday.
Meanwhile, dovish comments from European Central Bank policymaker Fabio Panetta saw European bond yields ease, but short-term rates remained a striking distance from multi-year highs.
Panetta said the ECB should avoid excessive tightening as it could destroy productive capacity and deepen a recession.
Germany’s 2-year government bond yield, more sensitive than other maturities to changes in policy rates, fell 4 basis points (bps) to 2.09% after hitting its highest since December 2008 at 2.252% last week.
“The CPI downside surprise aligns with a wide range of indicators pointing to lower global inflation which should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan.
“This positive message needs to be tempered by the recognition that the decline in inflation will be too small for central banks to declare mission accomplished, and further tightening is likely on the way.”
Europe’s benchmark STOXX rose 0.26% (.STOXX) and MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) added 0.6%, after jumping 7, 7% last week.
U.S. equity futures looked set to open lower as investors realized it would not outpace any expected slowdown in rate hikes, with S&P e-mini futures down 0 .35% and Dow e-minis down 82 points or 0.24% , .
EYES ON CHINA
Chinese stocks gained ground on reports that regulators have asked financial institutions to provide more support to struggling property developers.
China’s property index (.CSI000952) jumped 3.5% in response. Blue chips (.CSI300) rose 0.2%, helped by a series of changes to COVID restrictions in China, even as the country reported more cases over the weekend. Read more
“It’s hard to see how the news on the case is anything but negative from an economic perspective, but that’s the symbolism of the movement, however small, in the zero COVID strategy that markets are hanging on happily,” said Ray Attrill, head of FX strategy. at NAB.
US President Joe Biden on Monday met Chinese leader Xi Jinping in person for the first time since taking office on the Indonesian island of Bali ahead of a Group of 20 (G20) summit, both stressing the need for a better dialogue between their nations.
Bilateral relations are at their lowest level in decades amid disagreements over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions.
Last week’s collapse of crypto exchange FTX and the resulting fall in cryptocurrencies does not appear to have tainted other asset classes so far, as regulators grapple with the wreckage and digital asset investors are watching nervously.
Bitcoin recovered 4% to $16,993, after losing almost 22% last week, while FTX’s native token FTT rose 3% to $1.46, leaving its monthly losses at over 90 %.
The dollar stabilized amid diminishing expectations of a less aggressive Federal Reserve interest rate hike after Governor Waller’s intervention over the weekend.
The dollar index was last seen Monday at 106.86, still well below last week’s high of 111.280, while the euro eased slightly to $1.032, after climbing 3 .9% last week.
The pound fell back to $1.1782 ahead of the UK finance minister’s autumn statement on Thursday, in which he is expected to outline tax hikes and spending cuts.
The stronger dollar also drove oil prices lower, despite hopes of increased demand from China’s hints of reopening.
Brent crude futures fell 74 cents, or 0.75%, to $95.42 a barrel at 1326 GMT after stabilizing at 1.1% on Friday.
Reporting Lawrence White and Wayne Cole; Editing by William Maclean, Gareth Jones, Kirsten Donovan
Our standards: The Thomson Reuters Trust Principles.
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