As traders wait for Powell, stocks rise while the dollar falls | Paragon Alpha

As traders wait for Powell, stocks rise while the dollar falls

By Matea Gucec

US equity futures edged higher and the dollar slipped for a second day, as investors awaited a speech by Federal Reserve Chair Jerome Powell for signals about the path of interest-rate increases and assessed prospects for China’s economic reopening.

European shares climbed the most in more than a week, led higher by auto and consumer products stocks. Contracts on the S&P500 and the Nasdaq 100 posted moderate advances, with the underlying indexes having endured three days of losses.

Investors will keep their attention trained on Powell’s comments later on the economy and the labor market. He is widely expected to signal that the next Fed rate hike will step down to 50 basis points, though he will also likely warn that policy tightening has further to run.

Those signs of slower interest rate rises, alongside mounting optimism over China’s reopening, pushed the dollar lower and put the greenback on track for its worst month since 2010. Benchmark Treasury 10-year yields slipped and are down more than 25 basis points in November.

There’s a degree of caution among traders before the Fed chair’s remarks, given still-high global inflation and a robust jobs market.

“The market is hesitating a bit,” Societe Generale strategist Kenneth Broux said. “I would be very surprised if it is a dovish speech.” Some may hold the view that “the dollar has peaked and that the Fed Funds rate will peak at 5%, but I fear Powell will tell them it’s too soon,” he said.

Asian shares gained amid growing signs that China is easing its Covid-Zero policy. The offshore-traded yuan advanced, extending Tuesday’s rally, even as China’s factory and services activity contracted further in November, a reminder that widespread movement curbs continue to pressure economic growth.

“The market wants to see good news stemming from China’s gently shifting stance towards lockdowns but the reality is that a full re-opening is still some time away and will be politically tricky to execute,” said James Athey, investment director at Abrdn.

Oil prices rose for the third day after industry data pointed to a substantial draw in US crude stockpiles and investors counted down to an OPEC+ meeting that may see the group agree to cut production.

In US premarket trading, Crowdstrike Holdings Inc. sank after the cybersecurity company’s revenue outlook trailed analyst estimates. Hewlett Packard Enterprise Co. gained after its sales forecast surpassed expectations.

Amid all the recent bumpiness in markets, an index of global stocks was on course for a second monthly advance, while bonds were also poised for a monthly gain. The lockstep moves in stocks and bonds have taken their correlation to the highest level since 2012, heaping pressure on investors seeking to hedge risk by splitting their portfolios between the two asset classes.

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