Global markets pause as Fed prepares minutes

London — Global shares were little changed on Wednesday as investors kept their eyes peeled for the minutes of the most recent Federal Reserve meeting that could shed light on whether the US central bank may moderate its interest rate hikes.

The Fed has raised rates sharply in a bid to curb surging inflation and New Zealand’s central bank earlier increased interest rates by a record 75 basis points to 4.25%, a harbinger of possible hikes from the Fed, the European Central Bank and the Bank of England next month.

The minutes of the Federal Open Market Committee are due later on Wednesday, and US markets are closed on Thursday for Thanksgiving.

“There is an expectation that the Fed is probably closer to end of rate hiking cycle than the beginning; certainly to the extent of the rate hikes, the bulk are behind them,” said Mike Hewson, chief markets analyst at CMC Markets.

“There is very little interest heading into the [US] Thanksgiving weekend, and consequently markets are drifting higher on inertia. If you have made your money this year, you are most probably done,” Hewson said.

The MSCI All Country stock index was up 0.12%, though it is still about 18% lower so far this year.

In Europe, the Stoxx 600 companies rose 0.1%, leaving it down about 10% for 2022. US stock futures, the S&P 500 e-minis, were slightly firmer.

David Bizer, managing partner at investment manager Global Customised Wealth, said investors were being guided by what they think the Fed would do next, as signs of a slowdown in the US economy become clearer.

“The appreciation in markets overall in the fourth quarter is driven by this belief that the Fed is awakening to the fact that the pace and magnitude of their rate increases might have a near-term conclusion. It gives the markets confidence that this is going to be the end,” Bizer said.

On the corporate news front, shares in Credit Suisse sank nearly 6% after the bank said it expects to report a pre-tax loss of as much as Sf1.5bn in the fourth quarter.

A downturn in eurozone business activity eased slightly in November but overall demand continued to decline as cash-strapped consumers cut spending, according to data from S&P Global, adding to evidence the bloc is entering recession.

In China, authorities imposed restrictions to rein in a spike in Covid-19 infections, compounding concerns about the world’s second-largest economy.

Covid curbs

The MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5%, buoyed by gains in US stocks overnight. The index is up 12% so far this month.

Hong Kong’s Hang Seng index was up 0.6%, while China’s CSI300 Index gained 0.1%.

“The biggest story for investors in Asia is still the China reopening,” said Suresh Tantia, Credit Suisse’s senior investment strategist in Singapore.

“We had seen China markets rally up to 20% but those expectations are being dialled back. we think reopening will be a slower process.”

China on Wednesday reported 29,157 new Covid infections on November 22, compared with 28,127 new cases a day earlier. Case numbers in Beijing and Shanghai are rising steadily, and remain high in several major manufacturing and export hubs, prompting authorities to close some facilities.

The yield on benchmark 10-year Treasury notes traded at 3.7483% compared with its US close of 3.758% on Tuesday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, touched 4.5269% compared with a US close of 4.517%.

Ahead of the Fed minutes, the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, was up 0.019%.

The euro single currency was also slightly firmer on the day at $1.0312.

“The US dollar lost a little of its recent gains as central bankers’ consensus about how much more interest rates should rise is fraying,” Commonwealth Bank analyst Tobin Gorey wrote on Wednesday.

Oil prices inched higher as data showed a larger-than-expected US crude drawdown last week, outweighing concerns about lower demand from China.

US crude was up 0.8% at $81.59 a barrel, while Brent gained 1% to $89.23 a barrel.

Spot gold was traded at $1,737 per ounce, down 0.16% on the day.

While the FTX exchange collapse continues to roil cryptocurrency markets, bitcoin was up 2.5% in at $16,547.