China economy hopes give world stocks a boost, Fed nerves remain

  • Stocks in Hong Kong, China at a 3-month high
  • Dollar, continuous oil
  • US PPI inflation data later on Friday

LONDON/SYDNEY, Dec 9 (Reuters) – Global stocks rose on Friday on expectations that China’s economy will strengthen as COVID-19 restrictions ease, but stocks headed for a 2% weekly gain. that loss nervous markets ahead of the Federal Reserve’s policy meeting next week.

US S&P futures rose 0.18%, while European stocks (.STOXX) were steady.

Chinese Premier Li Keqiang, in comments carried by state media, said on Thursday that the country’s shift in its COVID-19 policy will allow the economy to grow, a day after a top-level party meeting that promised to focus on strengthening growth while optimizing the pandemic. steps.

Fed policymakers will meet next week and are likely to announce a 50 basis point increase in the US central bank’s lending rate, while indicating a slower pace of future rate hikes.

“The market is very focused on what the Fed is going to do on Wednesday, nobody wants to take any big positions,” said Giles Coghlan, chief currency analyst at HYCM, although he added that the Chinese stocks were helped by the fact. that China “made the COVID pivot”.

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The MSCI world equity index (.MIWD00000PUS) rose 0.22%, while MSCI’s broadest index of Asia-Pacific shares outside Japan gained 1.2% (.MIAPJ0000PUS), nearing a three-month high hit earlier. of the week.

Japan’s Nikkei (.N225) rose 1.2%. Britain’s FTSE (.FTSE) lost 0.2% to an 11-day low, hurt by energy stocks.

Hong Kong’s Hang Seng index (.HSI) jumped 2.3% to a three-month high, with mainland developers (.HSMPI) rising 9.9% to a four-month high. Chinese blue chips (.CSI300) rose 1% to their highest in nearly three months.

The world’s biggest investment banks expect global economic growth to slow further in 2023 after a year troubled by the conflict in Ukraine and rising inflation, triggering one of the fastest tightening cycles in monetary policy in recent times.

The US producer price index for final demand was forecast later on Friday to show a rise of 7.2% in the 12 months to October, up from 8% the previous month, ahead of closely watched data on consumer price inflation next week.

University of Michigan sentiment data is also due later on Friday.

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Data on Thursday showed some loosening in the US labor market, with weekly jobless claims rising modestly.

Futures are pricing in a near certain probability that the Fed will slow rate hikes by 50 basis points next week, but the target rate for the US federal funds rate should rise to around 4.9% next May.

“This slowdown is not a sign that the central bank’s work is nearly done … the slow pace of hikes begins a new phase of the Fed’s tightening cycle,” said Brian Martin, head of G3 economics at ANZ.

“With inflation proving sticky and the labor market still improving, the risks to our 5.00% terminal view are on the upside.”

In addition to the Fed, the European Central Bank and the Bank of England are also scheduled to announce interest rate decisions next week as policymakers continue to tap the brakes on economic growth through stronger rates to prevent high inflation.

The US dollar was steady against a basket of major currencies on Friday. It weakened 0.3% against the Japanese yen to 136.28 yen.

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The euro was flat against the greenback at $1.0557, below a recent five-month high of $1.0594.

The yield on benchmark 10-year Treasury notes eased 2 basis points to 3.4760%. The two-year yield weakened 3 bps to 4.28%.

Treasury yields fell to a three-year low earlier in the week on expectations of slower growth or that a recession would prevent a rise in US rates.

German 10-year government bond yields, the benchmark for the euro zone, gained 3 bps to 1.85%.

Commodity prices rallied, with iron ore prices surging 4.7% to a six-month high amid hopes that demand from China would improve.

Oil was steady as the shutdown of a major Canada-to-US crude pipeline disrupted supplies, but both benchmarks headed for a week of losses on concerns of slowing global demand growth.

US West Texas Intermediate (WTI) crude futures fell 0.1% to $71.43 a barrel, while Brent crude was steady at $76.09 a barrel.

Spot gold rose 0.1% to $1791.59 per ounce.

Editing by Jacqueline Wong, Kim Coghill and Simon Cameron-Moore

Our Standards: The Thomson Reuters Trust Principles.


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