Market Wrap: 2nd January 2023

Market Wrap: 2nd January 2023

Asian Shares Extend Fed Rally; Adani Stocks Slide:

  • Greenback continues falling, helping support emerging markets
  • Treasury yields hold drop as traders eye rate cuts this year
 

 

Asian shares advanced with US and Europe futures on Thursday, extending a rally on Wall Street after Federal Reserve Chair Jerome Powell said the central bank had made progress in its battle against inflation.

A benchmark of Asian stocks climbed about 0.7%, with Hong Kong-listed technology companies among the top performers. The picture was more mixed in Japanese and mainland China markets, while Adani Group companies led the Indian market lower. 

The dollar continued its decline against both Group-of-10 and emerging-markets currencies. A gauge of the greenback’s strength was at the lowest level since April as global investors position for a potential peak in US interest rates. 

Treasury yields held a drop from the US session of about 10 basis points in key maturities across the 2-10 year zone. Australian and New Zealand bonds broadly tracked the closing moves in Treasuries Wednesday. Japan’s benchmark 10-year yield steadied two basis points below the central bank’s 0.5% ceiling  

Powell’s comment that the “disinflation process has started” suggested that the aggressive tightening cycle is starting to have its desired effect of reducing the pace of price growth, helping the S&P 500 jump more than 1%. The tech-heavy Nasdaq 100 outperformed major benchmarks, closing at the highest since September. 

Positioning in US swaps markets assumes the Fed is getting closer to cutting rates as traders bet that economic conditions are likely to keep it from the additional rate increases that policymakers still anticipate. 

 

“I think market took what Powell didn’t say and ran with it,” said Karen Jorritsma, head of Australian equities at RBC Capital Markets. “He was pretty clear that he would stay on a restrictive stance as long as was needed and that some signs are coming through in the data although unemployment was at a 50-year low.” 

Adding to the positive tone for risk taking, in US after-hours trading, Meta Platforms Inc. surged, leading social-media stocks higher, after reporting better-than-expected sales during the holiday quarter.

“US sector performance was consistent with the big rally in fixed income across the curve, which for Asia-Pacific should support duration proxies like tech and soft landing beneficiaries like consumer discretionary,” said Chamath De Silva, senior portfolio manager for BetaShares Holdings.


Source: Bloomberg.com

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