GLOBAL MARKETS-Asia shares pin hopes on China opening, oil rallies

Asian shares rose on Monday as investors hoped that moves to ease pandemic restrictions in China would eventually brighten the outlook for global growth and commodity demand, though if full freedom could be a few months away.

The news helped bolster oil prices as OPEC+ countries reaffirmed their output targets ahead of the European Union ban and Russian crude price caps, which start on Monday. Several Chinese cities announced an easing of coronavirus curbs on Sunday as Beijing tries to make its zero-COVID policy more targeted and less onerous after recent unprecedented protests against restrictions.

“While the easing of some restrictions does not amount to a wholesale shift away from the dynamic COVID zero strategy yet, it is further evidence of a shifting approach and the financial markets are seeing a strong focused on the longer-term outlook in the near term. hit activity as virus cases look to continue,” said Taylor Nugent, an economist at NAB. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2%, after rallying 3.7% last week to a three-month high.

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Japan’s Nikkei was near flat, while South Korea’s fell 0.1%. S&P 500 futures fell 0.2%, while Nasdaq futures fell 0.1%. Markets lost some momentum late last week after November’s strong US payrolls report raised hopes for a less aggressive Federal Reserve, although Treasuries still ended last week. with a strong victory.

In fact, 10-year note yields have fallen by 74 basis points since early November, effectively removing much of the tightening from the Fed’s last outsized hike in cash rates. Markets are betting the Fed rates will rise by 5% and the European Central Bank by 2.5%.

“But labor demand in the US and the Euro remains surprisingly strong, and with a recent slowdown in financial conditions, risks are shifting towards higher-than-expected rates. at the terminal for the Fed and ECB,” warned Bruce Kasman, head of economic research at JPMorgan. “The combination of labor market strength with sticky wage inflation increases the risk that the Fed will deliver a higher than 5% rate forecast at its upcoming meeting and that Chair Jerome Powell’s press conference will shift to a more open guidance on any near-term ceiling on rates.”

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DOLLAR VULNERABLE The Fed meets on December 14 and the ECB the following day. Speaking on Sunday, French central bank chief Francois Villeroy de Galhau said he favored a half-point hike next week.

The central banks of Australia, Canada and India are expected to raise their rates at meetings this week. The sharp fall in US yields took a toll on the dollar, which fell 1.4% last week in a basket of currencies to its lowest since June.

It lost 3.5% on the yen alone and last traded at 134.39, leaving the October peak of 151.94 a distant memory. The euro stood at $1.0536, having gained 1.3% last week to its highest since early July. The drop in the dollar and yields has been a boon for gold, which is hovering at $1,797 an ounce after rising 2.3% last week to touch a four-month high.

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Oil prices surged after OPEC+ agreed to stick to their oil production targets at a meeting on Sunday. The Group of Seven and European Union states are set on Monday to impose a $60 per barrel cap on Russian offshore oil prices, although it is not yet clear how this will affect global supply and prices.

Brent gained $1.14 to $86.71 per barrel, while US crude rose $1.00 to $80.98 per barrel.

(This story was not edited by Devdiscourse staff and was generated automatically from a syndicated feed.)

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