SINGAPORE- Asian equities jumped on Thursday, while the dollar slid as investors poured into risky assets after Federal Reserve Chair Jerome Powell opened the door to a slowdown in the pace of monetary tightening.
In an eagerly-awaited speech, Powell said the central bank could scale back the pace of its interest rate hikes “as soon as December,” but cautioned that the fight against inflation was far from over.
Powell’s comments at the Brookings Institution in Washington sent Wall Street equities soaring, while the US dollar and Treasury yields fell.
MSCI’s broadest index of Asia-Pacific shares outside Japan jumped 2 percent in early Asian trade.
The index posted its biggest monthly gain in nearly 30 years in November as hopes for a Fed pivot towards slower rate hikes gathered steam after four consecutive 75-basis-point increases. But the index was still down about 17.5 percent on the year.
Japan’s Nikkei opened 1 percent higher while Australia’s S&P/ASX 200 index rose 0.85 percent. E-mini futures for the S&P 500 rose 0.20 percent.
ING regional head of research Robert Carnell said it will be very hard now for the Fed to push back against market expectations for a slowdown in rate hikes.
“It looks as if Fed Chair Powell didn’t get the memo to push back against pivot hopes and keep financial conditions tight before he went to give his speech,” he said.
“So let’s hope that inflation does keep on falling, or this may look like a missed opportunity.”
Markets are currently pricing in a 91 percent probability that the Fed will increase rates by 50 basis points on Dec. 14, and see a 9 percent chance of another 75 basis point hike.
Mainland China stocks opened up 1.2 percent and Hong Kong shares rose 2.5 percent in early trade after they closed higher on Wednesday following the easing of COVID-19 measures in Guangzhou city. — Reuters
