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Wall Street jumps amid tech-fuelled rally as Powell confirms slow rate hikes

Powell

Tech led US stocks to rally on the last day of November after Fed Chair Powell confirmed to slow down rate hikes ahead. Though Powell reiterates that restrictive monetary policy will stay until inflation shows consistent evidence of cooling down, market participants may believe that the central bank has reached a peak of hawkishness and the rate hike cycle may end sometime in 2023. Along with the policy-induced relief rally in equities, the US dollar softened, while the US bond yields slipped, which further lifted the other major G-10 currencies and commodity prices.

Another bullish factor that drives the recent rebound in risk assets is China’s progress to quit its Covid-zero policy. The Chinese officials said the Omicron variant is weakening and the country is getting into a new phase of fighting the pandemic, which may be interpreted as a start of exit from the restrictive Covid containment policy as “Dynamic covid-zero policy” was removed from the statement. The Chinese shares surged further following the speech, with Hang Seng Index up 26% in November. Notably, US-listed Chinese EV ADR stocks soared significantly, with Xpeng surging 47% and NIO up 21%.

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  • All three US benchmark indices had a bullish breakout above their key resistance levels, finishing higher for the second straight month.  All the 11 sectors in the S&P 500 finished higher, with growth sectors leading gains, including Technology and Communication Services, both up 5%. The cyclical sectors, typically in Energy and Financials lagged the broad performance, up 0.5% and 1.62%, respectively. In the tech big-cap companies, Netflix, Nvidia and Meta Platform outperformed, jumping 8.2%, 8.7% and 8%, respectively.
  • US-listed Chinese ADR shares jumped on China’s reopening optimism. The Chinese stock markets’ month-long rebound cannot be ignored, with the Hong Kong-based stock markets surging 26% and the FTSE China A50 index up 12% in November. The biggest mainland index, Shanghai 2000 rose 9% in the month. All the US-listed Chinese big tech and EV stocks soared.
  • Eurozone markets were buoyed by cooler-than-expected inflation data. The EU Flash CPI for November fell slightly to 10% from 10.6% the prior month due to a slow rise in energy prices. All the major European stock markets finished higher for the month, with Euro Stoxx 50 up 9.6%, FTSE up 6.7%, and DAX rising 8.6%. 
  • Crude oil jumped 3% as China’s relaxation on Covid curbs improved the demand outlook. The weakened US dollar has also contributed to the price rebound. The oil producer cartel, OPEC and allies are to meet on 4 December to discuss the future output volume. Now expectations for a further cut in production are muted due to China’s reopening progress.
  • Gold futures rose $19 per ounce, to 1,782 due to a weakened US dollar and falls in the bond yields. The precious metal is up 9% in November, and it may continue its strong rebounding pace, heading off the key resistance of 1,800.
  • Bitcoin bounced back above 17,000 for the first time since 15 November and Ethereum is approaching 1,300. The Cryptocurrencies slowly come back from their November lows, suggesting the FTX-induced rout in the digital coins may take a breather.
  • Chinese Yuan soared, leading APAC currencies, including the Japanese Yen, AUD and NZD, to rise against the USD for the second straight trading day amid China’s reopening optimism and Fed’s signals for a slowdown in rate hikes. USD/CNH fell 1.3% to 7.047 at AEST 8:13 am, approaching the key support of 7.
  • Asian equity markets are set to advance at the open. ASX futures were up 0.70%, Nikkei 225 futures rose 1.18% and Hang Seng Index futures jumped 2.12%.


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