Volkswacht Bodensee - Markets boosted by rate hopes ahead of Fed decision

A sense of relief has settled on trading floors over the past week following a report that the US central bank could take its foot off the accelerator in its push to rein in decades-high inflation.

Adding to the positive mood has been an indication that others around the world are looking at slowing down, though the excitement was tempered Friday by record inflation readings in Europe and data showing prices remained elevated.

Asian dealers were given a strong lead from Wall Street, where all three main indexes ended more than two percent higher thanks to a rally in tech firms following a strong earnings report from Apple.

Tokyo, Seoul, Sydney, Singapore, Taipei, Mumbai, Bangkok and Wellington all piled on more than one percent, while Jakarta was also up.

However, Hong Kong and Shanghai fell on concerns about China's growth outlook as the government continues its zero-Covid strategy of lockdowns, with restrictions imposed in towns and cities nationwide.

Data showing activity in the factory and services sectors contracted last month highlighted the impact the measures are having on the world's number two economy.

The drops also come after China announced a tally of over 2,500 new virus cases, the biggest outbreak in more than two months, fanning concerns of further painful shutdowns.

All eyes are on the Fed's policy meeting, which ends Wednesday.

While it is widely expected to announce a fourth successive 75 basis point hike, traders will be poring over the post-meeting statement looking for a hint that officials are open to dialling back the pace of increases.

The gathering comes as other central banks have recently indicated they are willing to ease up, with Canada raising rates less than expected last week, while authorities in Australia and Europe have taken a more dovish view.

Concerns that rapidly rising borrowing costs will send economies into a recession have hammered markets globally this year.

"There has been a succession of central bank downshifts, adding to the 'peak hawkishness' theme running through macro markets," said SPI Asset Management's Stephen Innes. "And investors are entirely focused on these U-turns as peak rates get priced in.

"So, people don't want to miss the stock market rally wagon, especially if the Fed conveys a similar policy downshift this week, sending the rally into overdrive as pivot procrastinators will be forced to chase."

The policy decision is followed Friday by the release of US jobs figures, which will give a fresh snapshot of the economy in light of rising prices and interest rates.

A better-than-expected earnings season has also provided support to global markets, easing concerns that tighter monetary policies would hammer firms' bottom lines, though big-name tech giants have taken a blow.

National Australia Bank's Rodrigo Catril said more than 70 percent of companies that had reported had beaten forecasts, though he added that while markets had risen over the past month, some traders remained cautious.

"Those with a positive inclination may look at October's equity performance as a sign of a new uptrend while others would suggest we have not yet seen the worst given the lag effects from monetary policy and the prospect of still more tightening to come," he said in a note.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: UP 1.8 percent at 27,587.46 (close)

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 14,700.12

Shanghai - Composite: DOWN 0.8 percent at 2,893.48 (close)

Euro/dollar: DOWN at $0.9945 from $0.9967 on Friday

Pound/dollar: DOWN at $1.1596 from $1.1618

Dollar/yen: UP at 147.76 yen from 147.46 yen

Euro/pound: UP at 85.79 pence from 85.77 pence

West Texas Intermediate: DOWN 0.9 percent at $87.09 per barrel

Brent North Sea crude: DOWN 1.0 percent at $94.85 per barrel

New York - Dow: UP 2.6 percent at 32,861.80 (close)

London - FTSE 100: DOWN 0.4 percent at 7,047.67 (close)

N.Fournier--BTB