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Early Morning Call: Powell's dovish tone pushes indices, precious metals higher

Markets responded positively to Fed chair, Jerome Powell’s suggestions that smaller US rate rises may start in December.

Equity market overview

US equity markets recorded strong gains yesterday after Federal Reserve (Fed) chair, Jerome Powell said it was time to slow the pace of coming interest rate hikes.

In his last scheduled appearance before the Fed's next meeting in two weeks, Powell said the bank was "slowing down" from the pace of 75 basis point (bp) rate hikes that have prevailed since June. But he also signalled that the economic adjustments underway could mean a long period of elevated interest rates. "Cutting rates is not something we want to do soon. That's why we're slowing down and going to try to find our way to what that right level is."

Indices in the APAC region followed the lead set by US markets. In China, the Caixin manufacturing PMI survey confirmed the downbeat data published in the official NBS survey yesterday. China's factory activity shrank for a fourth straight month in November. The index rose slightly to 49.4 from 49.2 the previous month and beat expectations of 48.9.

In Japan, the consumer confidence index declined in November to its lowest level since June 2020, to 28.6 from 29.9 a month earlier.

Equity markets in Europe also opened higher. In the UK, the Nationwide house price index rose by 4.4% in November year-on-year (YoY), after a 7.2% rise in October, and missed expectations of a 5.8% increase.

In Germany, retail sales fell more than expected, down 2.8% in October month-on-month (MoM). Economists had expected at 0.6% fall.

In the US, at 1.30pm, the market awaits personal income and spending for the month of October. Economists expect personal income to rise by 0.4% MoM, while spending should rise by 0.8%. At the same time Core PCE price index is forecast to rise by 5.9% in October YoY, after 6.2% in September.

And a bit later a 3pm, ISM manufacturing PMI is anticipated to fall below the 50 level for the first time since mid-2020, to 49.8. Last month the index managed to remain just above at 50.2. The index has been declining almost steadily since March 2021.

FTSE reshuffling

Elsewhere on the equity market, Edinburgh-based asset manager Abrdn is making a comeback to the UK's blue-chip stock index, while insurer Beazley will make its FTSE 100 debut in the benchmark's latest quarterly reshuffle.

Abrdn will re-enter the FTSE 100 next month after being demoted in August, alongside Lloyd's of London insurer Beazley and mining machinery firm Weir Group. The companies leaving the FTSE 100 are Harbour Energy, Intermediate Capital and Dechra Pharmaceuticals.


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