SYDNEY, Dec 5 (Reuters) – Asian stocks extended their rally on Monday as investors hoped moves to lift pandemic restrictions in China would eventually improve the outlook for global growth and demand for commodities, pushing the dollar down against the yuan.
The news helped oil prices firm as OPEC+ countries reaffirmed their production targets ahead of a European Union ban and Russian crude price cap, which begin Monday.
More Chinese cities announced an easing of coronavirus restrictions on Sunday as Beijing tries to make its zero COVID policy less onerous after recent unprecedented protests against the restrictions. Read more
It was also reported that Beijing could lower the threat classification for COVID-19, although there was a lack of clarity on timelines for future steps. Read more
“While the easing of some restrictions does not yet equate to a mass abandonment of the dynamic COVID zero strategy, it is further evidence of a changing approach and financial markets appear to be firmly focused on the longer-term outlook. short-term hit to activity as virus cases look set to continue,” said NAB economist Taylor Nugent.
Chinese blue chips (.CSI300) gained 1.7%, on top of last week’s 2.5% rebound, while the Hang Seng (.HS11) jumped 3.5%.
MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) added 1.7% to a three-month high, after rising 3.7% last week. The Japanese Nikkei (.N225) edged up 0.1%, while South Korea (.KS11) fell 0.4%.
EUROSTOXX 50 futures gained 0.1%, while FTSE futures were flat. S&P 500 and Nasdaq futures both fell 0.1%.
Wall Street had lost some momentum on Friday after November’s strong U.S. payrolls report challenged hopes of a less aggressive Federal Reserve, although Treasuries still sold off. last week with solid gains. Read more
Indeed, 10-year bond yields have fallen 74 basis points since early November, reversing much of the tightening from the Fed’s last outsized cash rate hike.
Markets are betting Fed rates will hit 5% and the European Central Bank around 2.5%.
“But demand for labor in the United States and the eurozone remains surprisingly strong, and alongside a recent easing in financial conditions, risks are shifting to higher than expected terminal rates for the Fed and the BCE,” warns Bruce Kasman, head of economic research. at JPMorgan.
“The combination of labor market resilience and sticky wage inflation adds to the risk that the Fed will deliver a rate forecast above 5% at its next meeting and that Chairman Jerome Powell’s press conference moves to more open guidance on any near-term ceiling on rates.”
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The Fed meets on December 14 and the ECB the next day. Speaking on Sunday, France’s central bank chief Francois Villeroy de Galhau said he favored a half-point hike next week. Read more
Central banks in Australia, Canada and India are all expected to raise rates in meetings this week.
The sharp decline in US yields weighed on the dollar, which fell 1.4% last week on a basket of currencies to its lowest since June.
It lost 3.5% on the yen alone and last traded at 134.34, leaving the October high at 151.94 a distant memory. The euro resumed its rise to $1.0578, after adding 1.3% last week to its highest level since early July.
The dollar also slipped below 7.0 yuan in offshore trade to hit a three-month low at 6.9677.
The lower dollar and yields were a boon for gold, which rose 0.5% to a four-month high of $1,807 an ounce after rising 2.3% last week.
Oil prices rebounded after OPEC+ agreed to stick to its oil production targets at a meeting on Sunday.
The Group of Seven and European Union states are due to impose a $60-a-barrel price cap on Russian oil transported by sea on Monday, though the impact this would have on global supply and prices is unclear. is not yet clear. Read more
Brent rose $1.67 to $87.24 a barrel, while U.S. crude rose $1.46 to $81.44 a barrel.
Reporting by Wayne Cole; Editing by Sam Holmes
Our standards: The Thomson Reuters Trust Principles.
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