The general upbeat feeling since last month's soft CPI print has carried into December after stocks surged thanks to a speech from Fed Chair Powell. Without mincing words, he said, "the time for moderating the pace of rate increases may come as soon as the December meeting," which cemented expectations that the Fed will move away from the Jumbo hikes in favour of a downshift to a 50bp pace.
The Fed downshift optimism is highly contagious, and Asian equity markets are rallying across the region. Also, China's reopening took another step forward, with multiple cities announcing ease of restrictions on Wednesday. At the same time, a higher-level message came from Vice Premier Sun Chunlan's consultation meeting with health experts on Wednesday, which signals further policy changes are in the offing.
Sun's comments are highly significant as she was the principal gatekeeper forcing local authorities to implement the Covid Zero policies staunchly.
But this positive momentum is a culmination of several factors, including signs that inflation was beginning to ease across the key economies, with downside surprises from the US and the Euro Area in the latest data.
In the meantime, with increasing signs that China is inching away from its Covid-Zero strategies, it continues to trigger a massive outperformance from Chinese assets. However, one asset that struggled was the US Dollar, and the unwinding risk premium meant it experienced its worst month in over a decade.
Comentarios