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GLOBAL MARKETS – Asian stocks pause as Fed warns of exuberance

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By Wayne Cole

SYDNEY, Nov 14 (Reuters) – Asian stock markets took a breather on Monday after last week’s rally as a top U.S. central banker warned investors against getting carried away by a US dollar figure. inflation, pushing bond yields and the dollar.

A slight drop in US inflation was enough to see two-year Treasury yields plunge 33 basis points for the week and the dollar lose almost 4%, the fourth biggest weekly drop since the start of the era. floating exchange rates more than 50 years ago.

However, the resulting easing of financial conditions in the United States was not entirely welcomed by the Federal Reserve, with Governor Christopher Waller saying it would take a series of subdued reports for the bank to ease its grip. brakes.

Waller added that markets were well ahead of themselves on a single inflation print, although he admitted the Fed may now be starting to think about rising at a slower pace.

Futures are betting heavily on a half-point rate hike to 4.25-4.5% in December, then some quarter-point moves to a high in the 4.75-4.75 range. 5.0%.

“The CPI downside surprise aligns with a wide range of indicators pointing to lower global inflation which should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” said Bruce Kasman, head of economic research at JPMorgan.

“This positive message needs to be tempered by the recognition that the decline in inflation will be too small for central banks to declare mission accomplished, and further tightening is likely on the way.”

MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.2%, after jumping 7.7% last week.

The Japanese Nikkei remained stable, while South Korea strengthened by 0.3%. S&P 500 futures fell 0.2%, while Nasdaq futures lost 0.3%.

EYES ON CHINA

Dealers were also waiting to see if Chinese stocks could extend their big rally amid reports that regulators have asked financial institutions to extend support to struggling property developers.

Blue tokens climbed higher on Friday, helped by a slew of changes to China’s COVID borders, even as the country reported more cases over the weekend.

“It’s hard to see how the news on the case is anything but negative from an economic perspective, but that’s the symbolism of the movement, however small, in the zero COVID strategy that markets are hanging on happily,” said Ray Attrill, head of FX strategy. at NAB.

US President Joe Biden will meet Chinese leader Xi Jinping in person on Monday for the first time since taking office, with US concerns over Taiwan, Russia’s war in Ukraine and North Korea’s nuclear ambitions top of mind. its agenda.

News on the COVID rules had fueled a rebound in short yuan hedging last week, which added to broad pressure on the dollar as yields plunged. The dollar regained some ground on Monday morning as its index added 0.4% to 106.870 but remained well below last week’s high of 111.280.

The euro eased slightly to $1.0324, after climbing 3.9% last week, while the dollar strengthened to 139.77 yen after falling 5.4% last week. .

The dollar lost almost as much to the Swiss franc, in part due to warnings from the Swiss National Bank that it would use rates and currency purchases to tame inflation.

The pound eased back to $1.1790 ahead of the UK chancellor’s autumn statement on Thursday, in which he is expected to outline tax hikes and spending cuts.

Cryptocurrencies remained under pressure as at least $1 billion in client funds were reported to have disappeared from the collapse of crypto exchange FTX.

Bitcoin was trading down 2.4% at $16,386, after losing nearly 22% in the past week.

The dollar’s recent pullback has given commodities a much-needed boost, with gold surging to $1,768 an ounce after surging above $100 last week.

Oil futures extended gains with Brent rising 86 cents to $96.85, while U.S. crude rose 80 cents to $89.76 a barrel.

(Reporting by Wayne Cole; Editing by Shri Navaratnam)

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