Wall Street stocks extended their gains on Wednesday after minutes from the Federal Reserve’s latest policy meeting suggested that the US central bank could ease up on its push to raise interest rates.
The S&P 500 index was up 0.6 percent in mid-afternoon trading in New York, while the Nasdaq Composite, which is stacked full of technology companies that are sensitive to changes in interest rate expectations, had gained 1 percent after closing the previous day. 1.4 percent higher.
Those moves came as minutes of the US central bank’s early November meeting showed a “substantial majority” of officials supported slowing down the pace of interest rate rises soon — even as some warned that monetary policy would need to be tightened more than expected next year.
In government bond markets, the yield on the 10-year US Treasury note — seen as a proxy for global borrowing costs — slipped 0.05 percentage points lower to 3.71 percent. The policy-sensitive two-year yield fell by 0.04 percentage points to 4.48 percent. Both yields, which move inversely to the debt instruments’ prices, had been broadly flat in the lead-up to the publication of the minutes.
The dollar fell further after the release of the minutes, with an index tracking the US currency against six peers sliding 0.9 percent.
Equities and bonds have come under pressure this year as the Fed and its international peers turn the screws on monetary policy in a bid to curb rapid price growth. Even after a softer-than-expected US inflation reading for October, markets are pricing in expectations of interest rates in the world’s largest economy peaking above 5 percent in June.
Elsewhere on Wednesday, oil prices remained down on the day, with international benchmark Brent crude down 4 percent at just under $85 a barrel.
The fresh falls for oil came as concerns about global demand were highlighted by a disappointing US purchasing managers’ report. The S&P Global US composite PMI for November, which takes into account the services and factory sectors, reached a three-month low of 46.3, suggesting the pace at which business conditions are deteriorating is worsening.
“Business conditions across the US worsened in November. . . with output and demand falling at increased rates, consistent with the economy contracting at an annualized rate of 1 percent,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
PMI reports for the euro area also pointed to a continued slowdown in business activity. “The [eurozone] data suggests the outlook has marginally improved and some tail risks are less likely, but is still consistent with a meaningful recession,” Barclays said in a note to clients.
The reports come as analysts remain concerned about China, which is launching large-scale lockdowns as it battles outbreaks of Covid-19.
Europe’s Stoxx 600 share index closed up 0.6 percent. In Asia, Hong Kong’s Hang Seng index edged up 0.6 percent, while China’s CSI 300 added 0.1 percent. Elsewhere, South Korea’s Kospi gained 0.5 percent.
Willem Sels, global chief investment officer at HSBC’s private bank, said he was bearish on equities in general but recently “dipped into” Chinese retail, hospitality and airline stocks on the expectation of further support for the country’s battered real estate sector and a gradual relaxing of zero-Covid policies in the second quarter of 2023.
If implemented, the measures would lower the chances of a full-blown property crisis and stimulate economic growth, Sels added. “Couple that with very attractive valuations, and other investors being underweight, and: [China] is a good risk-reward.”