Stocks sobered by Fed warning, China acts on property

  • Fed’s Waller downplays CPI as a single number
  • Beijing outlines ownership support and COVID steps
  • Biden to meet Xi at G20

SYDNEY/LONDON, Nov 14 (Reuters) – Stock markets continued last week’s rally in a more modest fashion on Monday after a top U.S. central banker warned investors against getting carried away by a single digit. inflation, while Chinese equities benefited from the aid to the country’s real estate sector. .

A slight drop in US inflation was enough to see two-year Treasury yields plunge 33 basis points for the week and the dollar lose almost 4% – the fourth biggest weekly drop since the start of the era. floating exchange rates more than 50 years ago.

However, the resulting easing of financial conditions in the United States has not been entirely welcomed by the Federal Reserve, with Governor Christopher Waller saying on Sunday that it would take a series of subdued reports for the bank to ease. its brakes.

Waller added that the markets were way ahead of themselves on a single inflation print, although he admitted the Fed may now be starting to think about a slower rate hike.

Futures are betting heavily on a half-point rate hike to 4.25-4.5% in December, then some quarter-point moves to a peak in the 4.75-4.75 range. 5.0%.

Two-year yields fell slightly to 4.39%, after plunging as low as 4.29% on Friday.

β€œThe CPI downside surprise aligns with a wide range of indicators pointing to lower global inflation which should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan.

“This positive message needs to be tempered by the recognition that the decline in inflation will be too small for central banks to declare mission accomplished, and further tightening is likely on the way.”

Europe’s benchmark STOXX rose 0.37% (.STOXX) and MSCI’s broadest index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) gained 0.73%, after jumping 7, 7% last week.

US markets looked set to open lower, with S&P E-mini futures down 0.26%.

EYES ON CHINA

Dealers were also waiting to see if Chinese stocks could extend their big rally amid reports that regulators have asked financial institutions to extend support to struggling property developers. Read more

China’s property index (.CSI000952) jumped 3.5% in response. Blue chips (.CSI300) rose 1%, helped by a host of changes to COVID restrictions in China, even as the country reported more cases over the weekend. Read more

“It’s hard to see how the news on the case is anything but negative from an economic perspective, but that’s the symbolism of the movement, however small, in the zero COVID strategy that markets are hanging on happily,” said Ray Attrill, head of FX strategy. at NAB.

Support for China’s real estate sector, which consumes a fixed amount of metals, propelled copper to a five-month high. Three-month copper on the London Metal Exchange (LME) rose 0.3% to $8,519 a tonne at 0725 GMT.

US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions top of mind. its agenda.

News on the COVID rules had fueled a rebound in short yuan hedging, which added to broad pressure on the dollar as yields plunged. The yuan strengthened 1.4% on Monday – the biggest such move since 2005.

The dollar index fell a fraction on Monday to 106.69, still well below last week’s high of 111.280.

The euro eased slightly to $1.0308, after climbing 3.9% last week, while the dollar strengthened to 139.56 yen after falling 5.4% last week. .

The dollar lost almost as much to the Swiss franc, in part due to warnings from the Swiss National Bank that it would use rates and currency purchases to tame inflation.

The pound fell back to $1.1755 ahead of the UK chancellor’s autumn statement on Thursday, in which he is expected to outline tax hikes and spending cuts.

Cryptocurrencies remained under pressure as at least $1 billion in client funds were reported to have disappeared from the collapse of crypto exchange FTX.

Bitcoin recovered 2.9% to $16,785, after losing almost 22% last week.

Oil prices pared earlier gains and fell on Monday after hopes of increased demand from China were offset by a stronger U.S. dollar. Brent crude futures fell 32 cents, or 0.3%, to $95.67 a barrel at 0725 GMT after stabilizing at 1.1% on Friday.

Reporting by Wayne Cole and Lawrence White; Editing by Shri Navaratnam, Kenneth Maxwell, William Maclean

Our standards: The Thomson Reuters Trust Principles.

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