Overnight Market Wrap: 5 October 2022

Overnight Market Wrap: 5 October 2022

Key Points:

  • Equities in Japan and Australia trade higher for second day
  • Rally pushes US stocks to best two-day run since March 2020

Asian stocks extended a rally on Wednesday following the best two-day run for US equities in more than two years, as investors begin to anticipate a slowing to central bank tightening that could jolt risk assets higher.

Australian, Japanese and South Korean equities traded higher, bolstering a rally on Tuesday as improving risk sentiment drags global equities from oversold levels. The S&P 500 climbed 3.1% and European stocks jumped by the biggest margin since March. Elon Musk revived his $44 billion bid for Twitter Inc., which soared 22%.

A decline in US job openings provided evidence the labor market may be cooling, offering hope the Federal Reserve may soon slow its rate-hiking path. A Fed official suggested the Fed still had further to go in tightening monetary policy to combat inflation, however, dimming hopes the central bank would follow the Reserve Bank of Australia, which increased rates less than anticipated on Tuesday.

“Last week’s pivot by the Bank of England seems to have convinced investors that the Fed now must give more weight to financial stability, which means that the current monetary tightening cycle might end sooner rather than later,” said Ed Yardeni, president of his eponymous research firm, in a note.

A Bloomberg index of the dollar steadied after falling 3% from a peak last week. The pound inched lower after climbing on Tuesday to the highest level in two weeks. The price of oil traded flat after jumping on Tuesday as OPEC+ said it was considering an output cut of as much as 2 million barrels a day, double prior estimates.

Investors will be keenly focused on Friday’s US jobs data that economists anticipate is set to show a slowing in new jobs added.

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