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Global stocks rallied as speculation that China may unwind its stringent Covid Zero policy fueled risk-on sentiment across markets. The dollar and Treasury yields fell ahead of a key Federal Reserve decision.
US-listed Chinese stocks soared in premarket trading, tracking the rally in Chinese markets after an unverified social media post triggered speculation that Beijing is looking to phase out restrictions, even as the country’s Foreign Ministry said it was unaware of such a plan. European luxury stocks also jumped, while miners outperformed as metals rallied. Oil advanced.
The strong reaction to the report “shows how much anticipation there has been for the reopening in the market,†said Hao Hong, partner at Grow Investment Group.
The Bloomberg Dollar Index snapped a three-day rising streak and Treasury yields fell to 3.95%. Swap markets are pricing in a 75-basis-point hike this week amid the Fed’s most-aggressive tightening campaign in four decades.
Still, strategists including JPMorgan Chase & Co.’s Marko Kolanovic believe the Fed’s aggressive hiking is nearing an end, providing the prospect of relief for markets. The US will likely raise rates by 50 basis points in December and pause after one more 25-basis-point hike in the first quarter, he said.
Indicators such as the inversion of the yield curve between 10-year and three-month Treasuries “all support a Fed pivot sooner rather than later,†wrote Morgan Stanley’s Michael Wilson.
“If the Fed does give us some indication that there is light at the end of the tunnel, we are very close if not already past peak dollar,†Mark Matthews, head of Asia research at Julius Baer said on Bloomberg TV. “Then all the currencies which have declined like the euro will rebound.â€
The euro, pound and yen rises on Tuesday. Meanwhile, the UK government said it’s inevitable that all Britons, especially the richest, will have to pay more tax to restore stability to the public finances and the Bank of England is set to become the first major central bank to sell off assets accumulated during a 13-year-old stimulus program.
Among other notable stock moves, Abiomed Inc. surged in premarket trading after health-care giant Johnson & Johnson said it will purchase the company for about $17.3 billion. Covid-19 vaccine makers BioNTech SE and Moderna Inc. also rose after Pfizer Inc. boosted its revenue forecast for the year.
In Europe, Ocado Group Plc surged after signing an exclusive deal with Lotte Shopping Co. to develop the South Korean retailer’s online grocery business. BP Plc climbed after announcing a further $2.5 billion buyback.
Elsewhere, protests by backers of Jair Bolsonaro, led by truck drivers, have spread across the country as the Brazilian president remains silent over his loss in Sunday’s election, so far refusing to concede defeat to his foe Luiz Inacio Lula da Silva.
—Bloomberg