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AFP

Business

World equities extend gains on Fed rate optimism

Jerome Powell US Federal Reserve China Covid-19 London

Stocks have rallied on signals of easing rate hikes from Federal Reserve chief Jerome Powell . ©AFP

London (AFP) - Global stocks mostly rose Thursday as Federal Reserve boss Jerome Powell flagged a moderation in interest rate hikes, while China signalled a softer approach to fighting Covid.

Asian and European equities tacked higher as investors also eyed news that eurozone unemployment plumbed to a record-low 6.5 percent in October.

On Wall Street, the Dow was down but the Nasdaq and S&P 500 rose after a closely-watched measure of US inflation edged down in October, data showed Thursday, in news likely to bring more relief following Powell's comments.

Oil prices climbed before this weekend's OPEC output meeting of key crude producing nations.

'Positive news'

"Powell...signalled a potential slowing of interest rate hikes," noted equity analyst Matt Britzman at UK stockbroker Hargreaves Lansdown.

"Markets have been clinging to every scrap of positive news lately and this was a continuation of that trend."

In a much-anticipated speech Wednesday, Powell said the full effects of the Fed's belt-tightening had yet to be felt but that it "makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down".

He signalled the US central bank's December gathering would likely see officials lift borrowing costs by 50 basis points.

The Fed has yanked up rates by a bumper 75 points at each of the last four meetings.

However, Powell did say policy would need to remain tight "for some time" to restore price stability, echoing comments from other Fed officials who suggested there might not be any cuts until 2024.

Analysts said the reaction to Powell's remarks -- which had been expected to be his most dovish in some time -- highlighted a sense of relief among investors that a long-hoped-for pivot was on the cards.

On Thursday, the Fed's preferred inflation measure -- the personal consumption expenditures (PCE) price index -- rose six percent from a year ago in October, down from a larger jump the month before.

Santa Rally on cards?

"For the first time in an age it feels like Powell is telling markets what they want to hear," said AJ Bell investment director Russ Mould.

"The message that an easing in the pace of rate hikes could come before the end of the year was just what investors were looking for and raises the prospect of a Santa Rally heading into Christmas."

The main US indices had surged in response on Wednesday, with the Nasdaq leading the way as rate-sensitive tech firms rocketed.

Hong Kong extended gains into a third day, with tech giants including Alibaba and Tencent tracking massive gains in their US-listed stock, while Shanghai was also up.

Equities were also helped by signs that China is edging towards a more pragmatic approach to fighting the coronavirus, having hammered the economy this year with its strict zero-Covid strategy of lockdowns and mass testing.

"We shouldn't be naive to the fact that a move away from the (Covid-zero) policy won't be easy and there'll be plenty of setbacks.But it's certainly a step in the right direction," said OANDA's Craig Erlam.

After widespread unrest against the measures -- and calls for more political freedoms -- authorities have announced moves aimed at loosening some restrictions.

The dollar sank, having soared across the board this year as Fed monetary policy diverged more and more from other central banks.