Singapore, Dec. 1 (BNA): Asian stocks jumped, while the dollar slid as investors flocked to riskier assets after Federal Reserve Chairman Jerome Powell opened the door to a slower pace of monetary tightening.
In a long-awaited speech, Powell said the central bank may lower the pace of interest rate hikes “as early as December,” but warned that the fight against inflation is far from over, according to Reuters.
Powell’s comments at the Brookings Institution in Washington sent stock prices higher on Wall Street, while dollar yields and US Treasury yields fell.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2% in early Asian trade.
The index posted its biggest monthly gain in nearly 30 years in November as hopes of the Fed shifting toward slower rate hikes gained momentum after four consecutive 75 basis point increases. But the index is still down about 17.5% year on year.
Japan’s Nikkei opened 1% higher while Australia’s S&P/ASX 200 rose 0.85%. E-mini futures for the S&P 500 rose 0.20%.
It will now be very difficult for the Fed to resist market expectations of a slowdown in rate hikes, said Robert Carnell, regional head of research at ING.
“It looks as if Fed Chairman Powell didn’t get the memorandum to back off pivotal hopes and keep financial conditions tight before he goes into his speech,” he said.
“So let’s hope inflation continues to fall, or this might look like a missed opportunity.”
Markets currently set a 91% chance that the Fed will increase interest rates by 50 basis points on December 14, and see a 9% chance of another 75 basis point increase.
Mainland China shares opened 1.2% higher and Hong Kong shares rose 2.5% in early trade after closing higher on Wednesday following the easing of COVID-19 measures in the city of Guangzhou.
US Treasury yields fell after Powell’s comments and remained lower on Thursday. The yield on the 10-year Treasury note fell 8.3 basis points, at 3.618%, while the yield on the 30-year Treasury note fell 6.8 basis points, at 3.755%.
The two-year US Treasury yield, which is usually in line with interest rate expectations, fell 5.2 basis points to 4.321%.
The safe-haven dollar also lost ground, as the dollar index – which measures the currency against six major peers including the yen and the euro – extended its decline on Wednesday by more than 1% through Thursday, dropping to 105.69.
The Japanese yen strengthened 1.02% against the dollar at 136.65 per dollar, while the British pound last traded at $1.2086, up 0.25% on the day.
In commodities markets, gold prices rose to a two-week high in early Asian trade on Thursday. Spot gold rose 0.5% to $1,776.95 an ounce, while US gold futures rose 1.73% to $1,776.20 an ounce.
FAE