Marketmind: Dovish Fed view courses through markets
By Jamie McGeever
(Reuters) — A look at the day ahead in Asian markets.
Asian markets are poised to start the week on the front foot, emboldened by Wall Street's late rally on Friday and plunge in U.S. rate expectations after Fed Chair Jerome Powell gave the clearest signal yet that the Fed is done raising interest rates and could soon move to cut them.
The S&P 500's rise to its highest level this year, and continued loosening of financial conditions via the falling dollar and bond yields should pave the way for a positive open for Asian stocks and risk assets on Monday.
The dollar shed 3% in November, its biggest monthly fall in a year, and last week fell for a third week in a row. The two-year U.S. Treasury yield slumped 40 basis points last week — its steepest fall since March — and the implied rate on December 2024 'SOFR' futures on Friday fell below 4% for the first time.
That packs a powerful punch. Many will argue that the U.S. bond and rates markets have gotten far too carried away, and that the Fed will not ease so quickly and aggressively next year.
But Fed policymakers are now in their 'blackout period' ahead of the December 12-13 policy meeting. This means there will be no guidance from officials to take the wind out of investors' sails, certainly not on Monday, when the economic calendar is also very light.
There would appear to be room for Asian equities to bounce back — by some measures, the region's underperformance has rarely been this bad in years.
The regional calendar highlights on Monday are New Zealand trade data and Australian inventories and corporate profit data, all for the third quarter.
Economists polled by Reuters expect New Zealand's terms of trade to fall 1.9% on from the previous
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