# World stocks upbeat on hopes for China re-opening, inflation peaking
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-11-30
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Markets Rally on China Reopening Hope
Meta Description: World markets surged with optimism on inflation easing and China's economic revival, boosted by key Fed remarks by Jerome Powell.
URL: https://financedigest.com/world-stocks-upbeat-on-hopes-for-china-re-opening-inflation-peakinghtml

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By Dhara Ranasinghe

LONDON (Reuters) -World equity markets rallied on Wednesday lifted by hopes that inflation is peaking and a re-opening of China’s economy is near, with focus turning to U.S. Federal Reserve chief Jerome Powell who speaks later in the day.

The pan-European STOXX 600 index rallied 0.7% higher after three straight sessions in the red, while U.S. [stock futures pointed to a firm open for Wall Street](https://www.financedigest.com/wall-street-stocks-power-higher-as-treasury-yields-and-dollar-ease.html "Wall Street stocks power higher as Treasury yields and dollar ease").

[Data showed euro zone inflation](https://www.financedigest.com/oil-jumps-on-lower-than-expected-us-inflation-data.html "Oil jumps on lower-than-expected US inflation data") eased far more than expected in November, raising hopes that sky-high price growth is now past its peak and bolstering the case for a slowdown in European Central Bank rate hikes next month.

A Santa rally appeared to come early for some markets, with [Asian shares set for their strongest month since 1998 and emerging market stocks](https://www.financedigest.com/asian-stocks-rally-as-bank-jitters-calm-alibaba-lifts-mood.html "Asian stocks rally as bank jitters calm, Alibaba lifts mood") poised for their biggest monthly surge since 2009.

But the dollar, [hit by expectations that a peak](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure") in U.S. [interest rates](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") is near, was set for its biggest monthly loss in more than 20 years.

[Fed chief Powell will speak on the economy at the Brookings Institution in Washington later](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week"). These are likely to be his last public [comments on monetary policy ahead of the blackout period before the Fed’s](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") Dec 13-14 meeting.

I’m not sure if markets are looking for a pivot but we think he will stress the Fed is nowhere [near the end](https://www.financedigest.com/exclusive-nissan-seeks-tech-tie-up-without-renault-as-alliance-nears-end-of-road.html "Exclusive-Nissan seeks tech tie-up without Renault as alliance nears end of road") of its tightening cycle,” said James Rossiter, head of global macro strategy at TD Securities in London.

[CHINA HOPES](https://www.financedigest.com/european-shares-rally-as-china-stimulus-lifts-recovery-hopes.html "European shares rally as China stimulus lifts recovery hopes")

Investors looked past disappointing business activity data from China and an escalation of protests in some parts of the country over stringent COVID-19 lockdowns, pinning hopes instead on a quicker reopening of the [world’s No.2 economy](https://www.financedigest.com/at-chinas-largest-trade-fair-exporters-worry-about-world-economy.html "At China’s largest trade fair, exporters worry about world economy").

MSCI’s broadest gauge of [Asia Pacific](https://www.financedigest.com/britains-superdry-sells-asia-pacific-ip-for-50-million.html "Britain’s Superdry sells Asia Pacific IP for  million") stocks outside Japan rallied more than 1% to its highest since September. It was set for its best [month since](https://www.financedigest.com/uk-factories-suffer-worst-month-since-may-2020-as-economy-stumbles-pmi.html "UK factories suffer worst month since May 2020 as economy stumbles – PMI") 1998.

[Hong Kong’s](https://www.financedigest.com/screening-of-winnie-the-pooh-horror-film-cancelled-in-hong-kong.html "Screening of ‘Winnie the Pooh’ horror film cancelled in Hong Kong") Hang Seng Index rallied more than 2%, although Japan’s blue-chip Nikkei fell 0.2%.

[Investors appeared to view protests in China](https://www.financedigest.com/oil-steadies-after-dipping-on-china-outlook-investors-await-fed-clues.html "Oil steadies after dipping on China outlook; investors await Fed clues") as a catalyst for the economy opening up again after stringent COVID lockdown moods. [Chinese officials on Tuesday said the country would speed up COVID-19 vaccinations for elderly](https://www.financedigest.com/chinese-fret-over-elderly-as-who-warns-of-holiday-covid-surge.html "Chinese fret over elderly as WHO warns of holiday COVID surge") people.

Markets are cheering the fact that the government is close to pivoting on COVID-19,” Raphaël Gallardo, [chief economist at Carmignac said in a webinar on the firm’s](https://www.financedigest.com/crypto-firms-will-develop-offshore-without-clear-us-rules-coinbase-chief-says.html "Crypto firms will develop ‘offshore’ without clear US rules, Coinbase chief says") 2023 outlook.

We can [say with confidence that a reopening](https://www.financedigest.com/britain-says-exact-date-on-u-s-travel-reopening-still-not-known.html "Britain says exact date on U.S. travel reopening still not known") is coming but it’s because the authorities will be overwhelmed with the number of (COVID) cases in the coming months.

Hopes for a [China reopening alongside an expectation that inflation](https://www.financedigest.com/oil-rises-about-2-with-u-s-and-china-inflation-in-focus.html "Oil rises about 2% with U.S. and China inflation in focus") and central bank interest rates may be close to peaking meant that November looks set to end as great month for many markets.

[China property stocks](https://www.financedigest.com/stocks-sag-as-hawkish-fed-cools-china-rally-awaits-us-jobs-data.html "Stocks sag as hawkish Fed cools China rally; awaits US jobs data") are up 70% this month, poised for their best ever month. They had [dropped over 80% since](https://www.financedigest.com/optimism-levels-drop-to-low-of-17-percent-according-to-first-survey-since-banking-regulations.html "Optimism levels drop to low of -17 percent, according to first survey since banking regulations") start of 2020.

And a [rally in emerging markets](https://www.financedigest.com/jittery-markets-attempt-risk-on-rally-while-waiting-for-powell.html "Jittery markets attempt risk-on rally while waiting for Powell") was in full swing, with MSCI’s emerging market stock index up around 14% in November and set for its best month since May 2009 and.

Optimism that demand from [China will improve also helped lift](https://www.financedigest.com/dollar-slips-yuan-gains-on-china-pmi-hot-inflation-lifts-euro.html "Dollar slips, yuan gains on China PMI; hot inflation lifts euro") Brent crude futures up 2.5% to $85.09 per barrel. U.S. West Texas Intermediate crude futures [climbed 1.78% to almost](https://www.financedigest.com/oil-climbs-almost-3-as-recession-fears-begin-to-fade.html "Oil climbs almost 3% as recession fears begin to fade") $80 per barrel.

FED TALK

Signs that U.S. inflation is peaking, meaning the Fed can slow the pace of its aggressive rate hikes, has [boosted government bond markets but dented](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins") the robust dollar.

The yield on the U.S. 10-year [Treasury yield](https://www.financedigest.com/wall-st-flutters-treasury-yields-ease-as-powell-resumes-testimony.html "Wall St flutters, Treasury yields ease as Powell resumes testimony") was down 2.5 basis points at around 3.72% and has fallen over 30 bps this month – set for its biggest monthly drop since March 2020.

Even if the surprise slowdown in inflation is good news, it is only the first in a long series of conditions the [Fed needs to see before it pauses](https://www.financedigest.com/dollar-pauses-for-breath-as-fed-swings-into-focus.html "Dollar pauses for breath as Fed swings into focus") its hiking cycle,” said ING senior rates strategist Antoine Bouvet.

Longer-term, the direction of travel is indeed towards lower inflation and an end to this tightening [cycle but we expect the Fed to take Fed Funds](https://www.financedigest.com/oiling-the-wheels-for-a-smooth-funding-cycle.html "OILING THE WHEELS FOR A SMOOTH FUNDING CYCLE") rates some 100 bps higher than currently, just under 5%, before this is the case.

The U.S. dollar index, which measures the performance of the greenback against six major currencies, fell 0.4% to 106.44.

It has lost around 4.5% in November, making this its biggest one-month [drop since](https://www.financedigest.com/apple-heads-for-largest-q3-revenue-drop-since-2016-as-iphone-sales-slow.html "Apple heads for largest Q3 revenue drop since 2016 as iPhone sales slow") 2010.

The euro was up 0.3% at $1.0363, while [sterling was 0.5%](https://www.financedigest.com/sterling-rises-0-5-as-dollar-takes-a-breather.html "Sterling rises 0.5% as dollar takes a breather") firmer at $1.2016 .

(Reporting by Dhara Ranasinghe; additional reporting by Kane Wu in [Hong Kong and Marc Jones and Amanda Cooper in London](https://www.financedigest.com/citadel-accelerates-hiring-push-in-hong-kong-and-london.html "Citadel accelerates hiring push in Hong Kong and London"), Editing by Jane Merriman and Chizu Nomiyama)


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