AFP

Global stocks rose further Thursday as Federal Reserve boss Jerome Powell flagged a moderation in interest rate hikes, while China signalled a softer approach to fighting Covid.

Asian and European equities tacked higher as investors also eyed news that eurozone unemployment plumbed to a record-low 6.5 percent in October.

Oil prices climbed before this weekend’s OPEC output meeting of key crude producing nations.

– ‘Positive news’ –

“Powell … signalled a potential slowing of interest rate hikes,” noted equity analyst Matt Britzman at UK stockbroker Hargreaves Lansdown.

“Markets have been clinging to every scrap of positive news lately and this was a continuation of that trend.”

In a much-anticipated speech Wednesday, Powell said the full effects of the Fed’s belt-tightening had yet to be felt but that it “makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down”.

He signalled the US central bank’s December gathering would likely see officials lift borrowing costs by 50 basis points.

The Fed has yanked up rates by a bumper 75 points at each of the last four meetings.

However, Powell did say policy would need to remain tight “for some time” to restore price stability, echoing comments from other Fed officials who suggested there might not be any cuts until 2024.

Analysts said the reaction to Powell’s remarks — which had been expected to be his most dovish in some time — highlighted a sense of relief among investors that a long-hoped-for pivot was on the cards.

– Santa Rally on cards? –

“For the first time in an age it feels like Powell is telling markets what they want to hear,” said AJ Bell investment director Russ Mould.

“The message that an easing in the pace of rate hikes could come before the end of the year was just what investors were looking for and raises the prospect of a Santa Rally heading into Christmas.”

All three main indexes on Wall Street surged in response on Wednesday, with the Nasdaq leading the way as rate-sensitive tech firms rocketed.

Hong Kong extended gains into a third day, with tech giants including Alibaba and Tencent tracking massive gains in their US-listed stock, while Shanghai was also up.

Equities were also helped by signs that China is edging towards a more pragmatic approach to fighting the coronavirus, having hammered the economy this year with its strict zero-Covid strategy of lockdowns and mass testing.

After widespread unrest against the measures — and calls for more political freedoms — authorities have announced moves aimed at loosening some restrictions.

The dollar sank, having soared across the board this year as Fed monetary policy diverged more and more from other central banks.

– Key figures around 1115 GMT –

London – FTSE 100: UP 0.1 percent at 7,578.14 points

Frankfurt – DAX: UP 0.7 percent at 14,496.76

Paris – CAC 40: UP 0.2 percent at 6,748.44

EURO STOXX 50: UP 0.6 percent at 3,986.56

Tokyo – Nikkei 225: UP 0.9 percent at 28,226.08 (close)

Hong Kong – Hang Seng Index: UP 0.8 percent at 18,736.44 (close)

Shanghai – Composite: UP 0.5 percent at 3,165.47 (close)

New York – Dow: UP 2.2 percent at 34,589.77 (close)

Euro/dollar: UP at $1.0442 from $1.0406 on Wednesday

Dollar/yen: DOWN at 136.34 yen from 138.07 yen

Pound/dollar: UP at $1.2150 from $1.2058

Euro/pound: DOWN at 85.94 pence from 86.30 pence

Brent North Sea crude: UP 0.6 percent at $87.45 per barrel

West Texas Intermediate: UP 0.7 percent at $81.11 per barrel

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Swedish-Swiss engineering giant ABB, which helped construct a huge power plant near Johannesburg, will pay reparations to South Africa over “criminal conduct” at the struggling power utility Eskom, prosecutors said Thursday.

“ABB has acknowledged liability and taken responsibility for the alleged criminal conduct of its employees involving contracts with Eskom,” the National Prosecuting Authority (NPA) said in a statement.

It said it had finalised a settlement agreement with Asea Brown Boveri (ABB) to pay over more 2.5 billion rand ($144,000) in “punitive reparations” to South Africa.

In 2020, ABB returned 1.6 million rand ($92,000) it received for the construction of the coal-fired Kusile power station, commissioned by Eskom in 2007. 

Construction of the plant, the fourth largest coal-fired generator in the world, has been fraught with allegations of graft. 

The NPA said the latest development showed its determination to “deal with corruption through prosecuting perpetrators and recovering the stolen money.”

“This settlement represents a bold and innovative step towards accountability… particularly in the form of restitution for the serious crimes committed at Eskom, during the state capture (corruption) period,” said the NPA.

The deal was negotiated with partner countries including Italy, Germany, the United States and Switzerland.

In October eight people, including the former CEO of Eskom, Matshela Koko, were arrested on corruption charges linked to a multi-million-dollar contract with the Swedish-Swiss firm.

Unemployment in the eurozone has dropped to a record low, at 6.5 percent in October, the EU’s Eurostat statistics office said Thursday.

The reading — the lowest since Eurostat started compiling jobless figures in April 1998 — was an indicator that the economies of the 19 EU nations using the euro had bounced back after the Covid pandemic.

The seasonally adjusted unemployment rate was markedly less than the 7.3 percent recorded a year ago.

Eurostat estimated that, for the entire 27-nation European Union, 12.95 million adults were unemployed in October — or 6.0 percent of the active population — with 10.87 million of them in the eurozone. 

While all OECD economies, with the exception of former EU member Britain, have recovered to their pre-pandemic size, global headwinds are stalling the recovery.

The eurozone is likely to tip towards recession within weeks, according to the European Commission.

Inflation is running hot, despite falling back in the latest reading on Wednesday, at 10 percent — above the European Central Bank’s two-percent target — largely because of high energy prices spurred by the fallout of Russia’s war in Ukraine.

Business activity has been declining for five straight months, according to a PMI survey published by S&P Global, although the rate of decline slowed in November.

The ECB will pore over the latest indicators as it walks a tight rope between raising interest rates to combat inflation and the risk of tipping the economy into a deep recession.

An analysis note from ING bank said the unemployment data showed “the labour market remains resilient despite the slowing economy”.

It added that it expected the ECB to remain “on high alert in its fight against inflation”.

Younger people had the highest unemployment rate in the EU and its eurozone, at 15.1 percent and 15.0 percent respectively, according to Eurostat. That was an increase over a year ago.

In the eurozone’s biggest economy, Germany, the unemployment rate was 3.0 percent, down from 3.3 percent in October 2021.

In the second biggest, France, it was 7.1 percent, down from 7.6 percent a year earlier.

The Czech Republic, which is not in the eurozone, had the lowest unemployment rate in the EU, at 2.1 percent, while eurozone member Spain was the highest, with 12.5 percent.

Tech billionaire Elon Musk said on Wednesday one of his companies would in six months be able to implant a device into a human brain that would allow communication with a computer.

The interface, produced by Musk’s start-up Neuralink, would allow the user to communicate directly with computers through their thoughts, he said.

“We’ve submitted I think most of our paperwork to the FDA (US Food and Drug Administration) and we think probably in about six months we should be able to have our first Neuralink in a human,” he said in a company presentation.

“We’ve been working hard to be ready for our first human (implant), and obviously we want to be extremely careful and certain that it will work well before putting a device in a human,” he said.

Musk — who bought Twitter last month and also owns SpaceX, Tesla and several other companies — has been known to make ambitious predictions about his companies, with several not becoming reality.

In July 2019, he vowed that Neuralink would be able to perform its first tests on humans in 2020.

The prototypes, which are the size of a coin, have been implanted in the skulls of monkeys.

At the Neuralink presentation, the company showed several monkeys “playing” basic video games or moving a cursor on a screen through their Neuralink implant.

Musk said the company would try to use the implants to restore vision and mobility in humans.

“We would initially enable someone who has almost no ability to operate their muscles… and enable them to operate their phone faster than someone who has working hands,” he said.

“As miraculous as it may sound, we are confident that it is possible to restore full body functionality to someone who has a severed spinal cord,” he said.

Beyond the potential to treat neurological diseases, Musk’s ultimate goal is to ensure that humans are not intellectually overwhelmed by artificial intelligence, he said.

Other companies working on similar systems include Synchron, which announced in July that it had implanted the first brain-machine interface in the United States. 

Asian stocks extended a global rally Thursday and the dollar sank after Federal Reserve boss Jerome Powell flagged a rate hike slowdown and China signalled a softer approach to fighting Covid.

A growing sense of hope that months of sharp monetary tightening around the world is finally reining inflation back from its decades-long highs sent equities surging in November, even as policymakers warned more work had to be done.

And in a much-anticipated speech Wednesday, Powell said the full effects of the Fed’s belt-tightening had yet to be felt but that it “makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down”.

He signalled the US central bank’s December gathering would likely see officials lift borrowing costs by 50 basis points, having pushed them up by a bumper 75 points at the past four meetings.

However, Powell did say policy would need to remain tight “for some time” to restore price stability, echoing comments from other Fed officials who suggested there might not be any cuts until 2024.

Analysts said the reaction to Powell’s remarks — which had been expected to be his most dovish in some time — highlighted a sense of relief among investors that a long-hoped-for pivot was on the cards.

All three main indexes on Wall Street surged, with the Nasdaq leading the way as rate-sensitive tech firms rocketed.

The gains extended November’s rally and helped claw back more of the hefty losses suffered for much of 2022.

Investors were “putting those nasty thoughts of a bear market to bed as the December Santa Rally springs alive”, said Stephen Innes at SPI Asset Management.

“Indeed investors are revelling in the afterglow of moderating Fed signals. And with the Fed done with jumbo hikes, it’s seemingly enough to mark the bottom in the bear market and could lead to a sustainable rally.”

He added that bets on rates topping five percent were fading and the advance in markets could push into the new year, with another slowdown in November inflation potentially fuelling a bull rally — when a market rises 20 percent from its recent low. 

“Still,” he warned, “inflation will need to play along.”

– China Covid hope –

In another sign of hope, data earlier showed that eurozone inflation eased for the first time in 17 months in November.

Hong Kong extended its rally into a third day, with tech giants including Alibaba and Tencent tracking massive gains in their US-listed stock, while Shanghai was also up.

Those rallies were also helped by signs that China is edging towards a more pragmatic approach to fighting the coronavirus, having hammered the economy this year with its strict zero-Covid strategy of lockdowns and mass testing.

After widespread unrest against the measures — and calls for more political freedoms — authorities have announced moves aimed at loosening some restrictions.

On Wednesday, Vice Premier Sun Chunlan, who heads China’s Covid campaign, told the National Health Commission that the fight was entering a new phase as Omicron weakens and more people are vaccinated.

Bloomberg News also noted that she did not refer to “dynamic Covid-zero”, the term used to explain Beijing’s strategy. 

“While we shouldn’t expect a dramatic shift in policy from the leadership, particularly before the March Congress, any modest softening in its Covid-zero policy will and should be welcomed,” said OANDA’s Craig Erlam. 

“The approach has been extremely damaging to growth and confidence and the protests highlight how public opinion towards it is changing.”

Among other markets, Tokyo, Sydney and Taipei added more than one percent while Singapore, Seoul, Wellington, Mumbai and Bangkok were also in positive territory.

London, Paris and Frankfurt rose at the open.

The dollar suffered another sell-off, tanking more than one percent to briefly hit as low as 135.84 yen Thursday, a level not seen since August.

The greenback’s losses come after it soared across the board this year as Fed monetary policy diverged more and more from other central banks.

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: UP 0.9 percent at 28,226.08 (close)

Hong Kong – Hang Seng Index: UP 0.8 percent at 18,736.44 (close)

Shanghai – Composite: UP 0.5 percent at 3,165.47 (close)

London – FTSE 100: Up 0.3 percent at 7,598.35

Dollar/yen: DOWN at 136.28 yen from 138.03 yen on Wednesday

Euro/dollar: UP at $1.0424 from $1.0408 on Wednesday

Pound/dollar: UP at $1.2100 from $1.2052

Euro/pound: DOWN at 86.20 pence from 86.34 pence

West Texas Intermediate: DOWN 0.6 percent at $80.05 per barrel

Brent North Sea crude: DOWN 0.6 percent at $86.46 per barrel

New York – Dow: UP 2.2 percent at 34,589.77 (close)