Global stocks rally as investors scale back expectations for rate hikes

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US jobs data on Friday, which showed a jump in the workforce and easing wage growth, was interpreted by investors as an indication that the Fed can be less hawkish

European stock indexes rose in early trading on Monday, boosted by investors scaling back their expectations for US Federal Reserve rate hikes and optimism about China’s borders reopening.The upbeat market momentum continued on Monday, with Asian stocks up after China reopened its borders, bolstering the outlook for the global economy. MSCI’s broadest index of Asia-Pacific shares outside Japan rose to its highest in more than six months.Europe’s Stoxx 600 was 0.

A soft landing is the ideal Federal Reserve policy goal after raising interest rates, a situation in which inflation slows but there are not enough job losses to trigger a recession. Money markets were pricing in a 25% chance of a half-point hike in February, down from around 50% a month ago. Investors will look to Thursday’s CPI data for further clues as to the Fed’s next move.

“The pace of reopening is much more rapid I think than anyone was expecting and as a result we’ll see this flow through to the fundamentals for several months to come,” said PineBridge’s Redha. PineBridge said in November it had sharply raised its China equity exposure on expectations of China’s Covid-19 rules easing.

 

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