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Stocks rose yesterday as a rally in the shares of Chinese state-owned enterprises injected strong upward momentum into the Asian trading session.
Australia’s dollar and government bond yields slid after the central bank said inflation appeared to have peaked. The nation’s stocks advanced on the prospect that policymakers are getting closer to the end of a cycle that has brought 10-straight interest-rate hikes.
Moves in other major currencies and Treasuries remained subdued within narrow ranges as traders await more cues from Chinese policymakers and Federal Reserve Chair Jerome Powell.
The rate on 10-year US government debt remained just below the closely watched 4 percent level. A gauge of greenback strength was down 0,1 percent.
Investors continue to weigh the impact of China’s modest growth target — which comes with the silver lining of less pressure on inflation — along with the likelihood of more interest rate hikes in economies including the US. Powell will face Congress twice this week, beginning later Tuesday.
The Hang Seng China Enterprises Index jumped as much as 2,4 percent while the Hang Seng Index climbed as much as 2 percent before gains in both gauges moderated. The moves came after general manager of the Shanghai Stock Exchange called for SOEs to have better access to funding from the market. The remarks were made during an interview with the Shanghai Securities News on the sidelines of the gathering of Chinese leaders in Beijing.
Later in the day yesterday, the Fed’s Powell began two days of testimony before Senate and House committees. He had the chance of telegraphing how much more policy tightening he thought was needed, ahead of a pivotal jobs report on Friday and the next US rates decision on March 22.
The current lack of traction for US equity markets shows many investors are concluding a recent rally was probably overdone, with recession risks lingering as central banks worldwide indicate they’re unlikely to soon pivot away from strict monetary tightening.
While the peak in commodities inflation may have already passed, and there are some encouraging signs in terms of food and other goods, there are still significant price pressures, said Henrietta Pacquement, head of the global fixed-income team at Allspring Global Investments.
“What is more persistent is what we are seeing on the services side and that may drag on a little longer,” she said on Bloomberg Television. Pacquement also cautioned that the outlook through 2023 is unclear. “There is a slim window for a no-landing of sorts but I do think you have to have the recession scenario in mind as well.”
Elsewhere in markets, oil rallied as a shale executive projected America’s most prolific basin will soon peak. China’s tempered economic forecast limited crude’s upside. Gold edged higher. — Bloomberg
Online Reporter