In a speech, the Federal Reserve chair, Jerome Powell said that the time to moderate the pace of rate hikes may come as soon as the December meeting. But Powell warns that rates must ultimately go higher than policymakers thought at the time at the September meeting: “we have more ground to cover”. In US data, the economy (as measured by GDP) grew by 2.9% in the year to September (survey: 2.7%). The ADP payroll survey reported a 127,000 lift in jobs in November (survey: 200,000). The JOLTs survey reported that job openings fell from 10.687 million to 10.334M in October (survey: 10.3M). The Federal Reserve’s Beige Book noted economic activity was flat or up slightly since the previous report, down from the “modest” average pace of growth.

European sharemarkets were firmer on Wednesday. Investors were encouraged by news of an easing of Covid restrictions in two of China’s bigger cities, Guangzhou and Chongqing. Chinese luxury stocks rose by 2.2%. Data also showed that euro zone inflation fell from 10.6% to 10% in November, and lower than the 10.4% consensus forecast. The continent-wide FTSEurofirst 300 index and the UK FTSE 100 both rose 0.8%.

US sharemarkets lifted strongly on Wednesday. Investors responded positively to the speech by Fed chair Powell, flagging a scaling back of the size of rate hikes while at the same time expecting rates to lift to higher levels than previously thought. At the close of trade, the Dow Jones index was up by 737 points or 2.2%. The S&P 500 index was up by 3.1%. The Nasdaq index rose by 484 points or 4.4%.

US government bonds were firmer on Wednesday (yields lower). US 10-year Treasury yields fell by 11 points to near
3.64%. US 2-year Treasury yields fell 14 points to 4.33%. Major currencies were firmer against the US dollar after the Fed chair delivered his speech. The Euro fell from European highs near US$1.0390 to lows near US$1.0290 but rebounded to US$1.0405 in late US trade. The Aussie dollar lifted from lows near US66.70 cents to US67.90 cents and was near highs in late US trade. And the Japanese yen lifted from lows near 139.87 yen per US dollar to near JPY138.00 and was near firmest levels in late US trade.

Global oil prices rose by around 3% on Wednesday. Data showed that US crude oil stocks fell more than expected in the latest week. A weaker US dollar also supported prices with news of an easing of Covid restrictions in China. The Brent crude oil price rose by US$2.40 or 2.9% to US$85.43 a barrel. And the US Nymex crude oil price rose by US$2.35 or 3.0% to US$80.55 a barrel.


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Base metal prices rose on Wednesday with copper up 4.0% and aluminium up 3.9%.

The gold futures price fell by US$3.80 an ounce or 0.2% to US$1,759.90 an ounce. Spot gold was trading near US$1,769 an ounce in late US trade. Iron ore futures rose by US35 cents a tonne or 0.4% to US$93.25 a tonne.

Originally published by CommSec