by Kevin Buckland
TOKYO (Reuters) – Long-term US Treasury yields fell to more than seven-week lows on Friday, while the dollar fell near recent lows against industry peers as markets continued to digest easing signals from the Federal Reserve.
Hopes for a less aggressive pace of monetary tightening in the US as early as next month continued to support some equity markets in Asia, but Hong Kong’s Hang Seng fell sharply as a record number of COVID-19 infections in China clouded the outlook.
On Thursday, after Thanksgiving in the US, the 10-year Treasury yield fell to 3.659%, the lowest since October 5 during Tokyo trading. Two-year rates fell to a one-week low of 4.44%.
The dollar index, which measures the greenback against the euro, yen and four other rivals, was not far off Thursday’s low of 105.62 and was most recently at 105.86.
A “significant majority” of Fed policymakers agreed that it would be “soon appropriate” to slow the pace of rate hikes, the minutes of their last meeting on Wednesday showed.
Futures markets show that investors are now seeing US interest rates rise above 5% by May, and about two-thirds are pricing in the possibility that the Fed will halve a range of 75 basis points on Dec. 14. Slows the growth of points.
“The way the market has responded — stocks are rising, bond yields are falling and the dollar is weakening — if I were the Fed, I think I’d better start saying something because otherwise.” The last 75 basis points of tightening I’ve seen are essentially pointless, and the next 50 will be swallowed up by the market. “Don’t worry, the pivot is coming,” said ING economist Rob Carnell. “
“You want your rate hike to mean something, so I think once everyone digests their turkey and goes back to work — probably early next week — we’ll see what comes out of the Fed.” We are going to hear very strange things.”
US S&P 500 E mini futures were reported up 0.2% on Friday as Wall Street trade resumed.
Equity markets in Asia and the Pacific were mixed, with the Australian benchmark posting a gain of 0.35%, but a technology-led sell-off in Hong Kong stocks weighed on sentiment in other parts of the region.
The Hang Seng fell 0.93%, while the tech sector fell 2.22%.
Japan’s Nikkei lost 0.34% and South Korea’s Kospi lost 0.31%.
China reported a record number of COVID infections on Thursday, with cities imposing local lockdowns, mass testing and other restrictions, quelling recent optimism about the world’s second-largest economy entering a strict zero-COVID phase. The transition from policies to living with illness.
“Investors are rightly concerned,” says ING’s Carnell. “They still don’t have a good enough health network in China to handle a full-blown outbreak, with so many people getting sick.”
However, mainland Chinese blue chips rose 0.51%, supported by government measures to support the real estate market. An index of property developer shares rose 5.33%.
Oil rallied slightly, briefly limiting this week’s losses, driven by concerns about Chinese demand and hopes that a higher price cap planned by the Group of Seven on Russian oil would keep supply up. Will stay [O/R]
Brent oil futures rose 13 cents, or 0.2%, to $85.47 a barrel.
US West Texas Intermediate (WTI) crude oil futures were up 35 cents, or 0.5%, to close Wednesday at $78.32 a barrel. There was no settlement of WTI on Thursday due to the US holiday.
Both contracts were heading for a third straight weekly drop, heading for a close to 2% decline.
Gold rose 0.2% to $1,758.44 an ounce amid a weak dollar.
(Reporting by Kevin Buckland; editing by William Mallard)