The news helped firm oil prices as OPEC+ nations reaffirmed production targets ahead of the European Union ban and Russian crude price cap, which begin on Monday. [O/R]
Other Chinese cities announced an easing of coronavirus restrictions on Sunday, with Beijing trying to make its “zero COVID” policy more targeted and less onerous following recent unprecedented protests once morest the restrictions.
“While the easing of some restrictions does not yet equate to a complete abandonment of the aggressive zero COVID strategy, it is further evidence of a shifting approach and financial markets appear to be firmly focused on the outlook. long-term rather than the short-term impact on the business, as the virus cases look set to continue,” said NAB economist Taylor Nugent.
MSCI’s broadest index of stocks in the Asia-Pacific region, excluding Japan, gained 0.2%, following climbing 3.7% last week to a three-month high.
The Japanese Nikkei remained virtually unchanged, while the South Korean fell 0.1%. S&P 500 futures slipped 0.2%, while Nasdaq futures fell 0.1%.
Markets lost some momentum late last week following the November US jobs report challenged hopes of a less aggressive Federal Reserve, although Treasury bills still ended last week with solid gains.
Indeed, 10-year bond yields have fallen 74 basis points since the start of November, offsetting much of the Fed’s rate hike.
Markets are betting that Fed rates will top 5% and European Central Bank rates around 2.5%.
“But demand for labor in the US and the Eurozone remains surprisingly strong, and alongside a recent easing in financial conditions, risks are pointing to higher than expected terminal rates for the Fed and the Eurozone. BCE,” warns Bruce Kasman, head of economics research at JPMorgan.
“The combination of labor market resilience and sticky wage inflation adds to the risk that the Fed will deliver a rate forecast above 5% at its next meeting and that Chairman Jerome Powell’s press conference will slip away. point to more open guidance on any short-term rate cap.”
THE VULNERABLE DOLLAR
The Fed meets on December 14 and the ECB the following day. Speaking on Sunday, the head of the French central bank, Franois Villeroy de Galhau, said he favored a hike of half a point next week.
Central banks in Australia, Canada and India are all expected to raise rates at their meetings this week.
The steep drop in US yields has spilled over into the dollar, which lost 1.4% last week across a basket of currencies to its lowest level since June.
It lost 3.5% on the yen alone and last traded at 134.39, leaving the October high of 151.94 a distant memory. The euro settled at $1.0536, following gaining 1.3% last week to reach its highest level since early July. [USD/]
The falling dollar and yields were a boon for gold, which was hovering at $1,797 an ounce following rising 2.3% last week to hit a four-month high. [GOL/]
Oil prices rebounded following OPEC+ agreed to stick to its oil production targets at a meeting on Sunday.
The Group of Seven and European Union states are due to impose a $60-a-barrel cap on Russian maritime oil on Monday, although it is not yet clear what impact this would have on global supply and prices.
Brent rose $1.14 to $86.71 a barrel, while US crude gained $1.00 to $80.98 a barrel.
