Indices soar as Fed sets to test policy moderation, oil firms above $80.00

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  • Asian equities have roared strongly as Fed confirmed a less-hawkish December monetary policy.
  • Chinese indices have hogged the limelight on upbeat Caixin Manufacturing PMI data.
  • Oil prices are holding gains above $80.00, awaiting the OPEC+ meeting outcome for fresh impetus.

Markets in the Asian domain are gaining like there is no tomorrow as the Federal Reserve (Fed) chair Jerome Powell has confirmed moderation of extreme-tight monetary policy in a December meeting. A slowdown in labor demand and economic activities, and a surprise drop in October’s inflation report have set the stage for a decline in the interest rate hike pace to 50 basis points (bps).

The odds of termination of the 75 bps rate hike spell by the Fed are extremely solid as the Fed is required to safeguard the United States economy from economic shocks along with the agenda of bringing price stability.

At the press time, Nikkei225 jumped 1.06%, ChinaA50 soared 2.20%, Hang Seng ramped up 1.74% and Nifty50 added 0.48%.

Fed Powell’s positive commentary on the interest rate hike slowdown has strengthened the risk-appetite theme in the global market. This may also force analysts to trim their contracted economic projections.

Chinese equities are advancing like there is no tomorrow led by a surprise rise in Caixin Manufacturing PMI data. The economic data has been recorded at 49.4 for November month vs. 48.9 as projected and October’s release of 49.2. Despite extreme lockdown measures in November by Chinese authorities to contain the COVID-19 epidemic, the economy has managed to display better-than-projected performance.

Meanwhile, Japanese investors are awaiting the speech from Bank of Japan (BOJ) Governor Haruhiko Kuroda, which is scheduled for Friday. The BOJ Governor is likely to provide guidance about the likely monetary policy action. In the Asian session, BOJ policymaker Asahi Noguchi favored the continuation of policy easing to keep inflation around 2% as he sees the maintenance of inflation uncertain at desired levels. He further added that wages must rise at a faster pace than the rate of inflation to achieve the appropriate level of inflation in a stable manner.

On the oil front, oil prices have turned sideways above $80.00 as investors are awaiting the OPEC+ meeting, scheduled for December 4 for fresh impetus. On Wednesday, oil prices displayed a significant rally after the US Energy Information Administration (EIA) reported a third consecutive drawdown in oil inventories.