USA finance

ASX set to climb, as European stocks rise on signals of smaller US rate hikes

Australian shares are set to rise on Friday, after European stocks rose overnight on hopes of smaller interest rate rises from the US boosted investor confidence.

Key points:

  • The ASX is set to rise after a positive Thursday
  • Wall Street was closed for the Thanksgiving public holiday
  • Binance deploys $1 billion bailout to keep crypto afloat

ASX futures were up 14 points, or 0.2 per cent, to 7,267, by 7.15am AEDT.

The Australian dollar was up 0.5 per cent, to 67.62 US cents.

Shares hit a two-month high on Thursday and the US dollar swooped towards a three-month low, after the Federal Reserve signals smaller interest rate rises from next month, followed by the message from Frankfurt that the European Central Bank (ECB) will plough on.

Wall Street was shut for the Thanksgiving public holiday, so it was up to Europe to continue the rebound in market confidence.

“The Federal Reserve minutes signalled that some sensible voices are trying to drown out Fed Chair Powell’s relentless ‘hike, hike, hike’ chant,” UBS Chief Economist Paul Donovan said.

A “substantial majority” of Fed policymakers had agreed it would “likely soon be appropriate” to slow the pace of interest rate rises, the minutes released on Wednesday showed.

However, Mr Donovan pointed out that there was no signal of an actual halt yet and various Fed members thought rates might need to go “somewhat higher” than expected.

Futures markets show investors now see US rates peaking just above 5 per cent by May and are pricing in a roughly 75 per cent chance that the Fed now switches to 50-basis-point rises rather than the 75 bps it has been applying recently.

The ECB’s equivalent minutes out on Thursday showed its rate-setters fear that inflation may now be getting entrenched in the euro zone.

“Incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral’ rate,” one of its most influential Executive Board members Isabel Schnabel said separately.

For the currency markets, it meant the seven-week sell-off in the dollar continued.

The euro rose as high as $US1.0447, edging it closer to its recent four-month top of $US1.0481, while the US dollar weakened 0.6 per cent against the Japanese yen to 138.70 yen and past $US1.20 against sterling.

“The dollar could stay pressured for a bit longer, but it’s probably embedding a good deal of Fed-related negatives now,” analysts at ING wrote.

Meanwhile, the pan-European STOXX 600 index gained 0.5 per cent, Germany’s DAX was up 0.8 per cent and Britain’s FTSE was a percentage point higher.

Binance billion dollar crypto bailout

Meanwhile, cryptocurrency exchange Binance said on Thursday that it was committing $US1 billion to establishing an industry recovery initiative (IRI) to invest in companies from the digital assets sector.

That move comes at a time when the crypto market is teetering from the collapse of FTX, which is seeking Chapter 11 bankruptcy protection in the United States.

The collapse of one of the biggest crypto exchanges in the world has also fuelled worries around the industry’s continued ability to draw investments from venture capital and private equity giants.

Binance said it intended to increase its commitment amount to $2 billion in the near future, depending on need.

“We anticipate this initiative will last about six months and will be flexible on the investment structure — token, fiat, equity, convertible instruments, debt, credit lines, etc.,” the crypto exchange added in a statement.

It said such a fund would help “reduce further cascading negative effects of FTX” without giving an exact figure for the bailout.

Several crypto firms have been bracing from the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.

Commodities

Spot gold was was up 0.5 per cent, selling for $US1,775.10.

On oil markets, Brent crude was down 0.3 per cent, at $US85.12 per barrel, while West Texas crude was in the green but almost flat, at $US77.96 per barrel.

ABC News/Reuters

Shares hit a two-month high on Thursday and the US dollar swooped towards a three-month low, after the Federal Reserve signals smaller interest rate rises from next month, followed by the message from Frankfurt that the European Central Bank (ECB) will plough on.

Source: https://www.abc.net.au/news/2022-11-25/finance-markets-dow-jones-asx-fri/101696902

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