GLOBAL MARKETS – Stocks erase COVID brakes in China and the dollar retreats

Global equities rose on Tuesday, recouping some of the previous day’s losses, as improving investor risk appetite drove flows into equities and commodities, although concerns over more COVID infections in China have limited the gains. The Federal Reserve will release the minutes of its latest meeting on Wednesday, which investors will scan for insight into policymakers’ views on the outlook for inflation and economic growth.

The dollar retreated after strong overnight gains while oil edged higher after Monday’s volatile selloff. The MSCI All-World equity index rose 0.2%, putting it on track for a second month of gains – its longest streak of gains since late 2021.

In Asia, Chinese blue chips closed flat on the day, after falling 0.5%, while the Japanese Nikkei rose 0.6%. Chinese stocks came under pressure after Beijing closed parks, malls and museums on Tuesday, while more cities resumed mass testing for COVID-19 as cases surged, fueling concerns about the blow to the world’s second-largest economy.

China’s capital said on Monday it was facing its toughest test of the pandemic, raising the possibility that the government may have to reimpose strict mobility restrictions and issue stay-at-home orders in other cities. The dollar pared some of the gains that took it to a 10-day high on Monday, when investors dumped risky assets on COVID surges in China and were last down 0.2%. The dollar was put under pressure, particularly against the euro and the yen, which rose by 0.2% and 0.3% respectively.

“On the Fed side, tomorrow’s minutes will be important to watch, but the recent Fedspeak has no doubt added a layer of caution to the dovish pivot’s enthusiasm, which could mean investors may also be more reluctant to over-interpreting dovish minutes signals,” said ING strategist Francesco Pesole. Meanwhile, the OECD said on Tuesday that the global economy should avoid a recession next year, but the worst energy crisis since the 1970s will lead to a sharp slowdown that will hit Europe the hardest.

Still, analysts at National Australia Bank questioned whether demand for the U.S. currency would last. “Evidence that US inflation has peaked and may fall significantly in 2023, together with developments in China and Europe, convinces us that a cycle of dollar depreciation is now underway,” they said. said in a note on Tuesday.

US Treasury yields eased across most maturities ahead of Wednesday’s minutes. The benchmark 10-year Treasury yield fell 3 basis points to 3.80%, while the two-year bond yield also fell 3 basis points to 4.50%.

Oil rose on Tuesday, a day after Saudi Arabia denied a media report that it was discussing an oil supply boost with OPEC and its allies. Brent crude futures rose 1.4% to $88.64 a barrel, after falling 6% the day before before Saudi Arabia issued its denial and stemmed the decline.

“Markets remain subject to even greater volatility due to a complete shortage of liquidity in the market, as was all too evident in crude oil futures as they plunged into the WSJ story suggesting that Saudi Arabia could offer a very surprising OPEC production increase at the December meeting, only to reverse completely when it was declined,” the chief global economist said. of ADM Investor Services, Marc Ostwald. Spot gold broke four days of losses, rising 0.2% to trade at $1,741.40 an ounce.

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)