SYDNEY, Nov 24 (Reuters) – A look at the day ahead in Stella Qiu’s European and global markets:
Another central bank pivots. The Bank of Korea slowed its pace of tightening to a modest 25 basis points on Thursday, becoming the latest central bank to back off outrageous rate hikes.
This contributed to the risk mood in the market, with Asian equities mostly advancing and the US Dollar generally weaker.
Overnight, markets rejoiced at the prospect of the US Federal Reserve downgrading to a 50 basis point lower hike at its next policy meeting in December, ignoring warnings that rates may yet have to peak. above 5% by the middle of next year.
Minutes from the Fed’s November monetary policy meeting showed that a “substantial majority” of policymakers believe it will “probably soon be appropriate” to slow the pace of rate hikes.
Long-term Treasuries surged. Yields on 10-year bonds fell to 79 basis points below two-year yields, a curve inversion on a scale not seen since the dotcom crash of 2000 and, on the face of it, a signal that investors expect a deep economic slowdown. In the coming months.
However, a lot of US economic data remains healthy regardless of what the bond market says. The Atlanta Fed’s GDPNow showed the economy growing at an annualized rate of 4.3% so far in the fourth quarter, implying growth is picking up, not slowing.
Elsewhere, China’s new economic stimulus – a likely cut in the reserve requirement ratio for banks and a bailout for the struggling real estate sector – helped real estate stocks but failed to lift the broader mainland market. .CSI300, which fell 0.3% as the spike in COVID cases still dominated investor sentiment.
COVID infections in China have hit an all-time high as Beijing, which has the strictest rules, failed to contain the spread of the virus. In fact, the author’s former community building in Beijing was cordoned off for at least three days, its first such closure.
Ting Lu, chief economist for China at Nomura, said a reduction in the RRR would likely be of little use, as the biggest hurdle lies in the government’s zealous approach to dealing with COVID, rather than in insufficient loanable funds.
“In our view, ending zero COVID as soon as possible is key to increasing demand for credit and supporting growth.”
Key developments that could influence markets on Thursday:
Ifo business climate index in Germany
Riksbank expected to raise rates by 75 basis points, with a risk of 100 basis points
Speakers: ECB officials including Vice President Luis de Guindos, Board Member Andrea Enria, Board Isabel Schnabel and Dave Ramsden and Huw Pill of the Bank of England
Editing by Sam Holmes
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