Stocks cap best week since June on slowdown in US inflation

Investors downplay contagion risks from sell-off in cryptocurrencies

Traders work at the New York Stock Exchange. The S&P 500 closed near session highs in the biggest weekly gain since June. AP
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US stocks gained surer footing after a choppy morning session, extending a rally sparked by a slowdown in inflation. The dollar fell, declining for a fourth week.

The S&P 500 closed near session highs in the biggest weekly gain since June.

The tech-heavy Nasdaq 100 climbed more than 1.5 per cent, notching its best week in two years.

Cash Treasury trading is closed for Veterans Day.

Elsewhere, China easing some Covid-19 restrictions helped underpin risk sentiment on Friday, with US-listed Chinese stocks rising along with commodities from oil to soybeans to precious metals.

Meanwhile, cryptocurrencies resumed a sell-off amid FTX’s deepening woes with Sam Bankman-Fried’s crypto empire filing for bankruptcy.

While that news weighed on sentiment in early trading, investors downplayed contagion risks.

“From my vantage point, the real-world impact seems somewhat limited,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors.

“It’s hard to imagine how it has a big impact on the overall economy. Crypto makes up a relatively small portion of financial markets, financial transaction, jobs, consumer spending, business spending, etc.”

US stocks soared the most since 2020 on Thursday after a better-than-forecast cooling in US inflation improved prospects of a dovish tilt by the Federal Reserve.

On Friday, the University of Michigan’s preliminary November survey showed US consumer inflation expectations increased in the short and long run, while sentiment retreated.

Boston Fed president Susan Collins said that the risks of going too far have risen after a string of jumbo-sized rate hikes, but noted a smaller, more “deliberate” increase should not be confused with backing down from curbing price pressures.

“The moderation in the pace of inflation is a welcome development, while it is still far too early to declare the inflation threat over,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote.

“We still think the Fed is likely to raise at least another 100 basis points in total before it pauses the rate hiking cycle.”

While markets reacted positively to the inflation print on Thursday, Credit Suisse strategists led by Jonathan Golub said the rally was “out of sync with the size of the surprise”.

This, they note, follows a pattern of outsize responses to CPI prints, which has averaged 2.8 per cent on the day in the past seven releases.

The dollar slumped more than 1 per cent on Friday in the biggest weekly drop since the pandemic-fuelled volatility in March 2020.

Bitcoin dropped as much as 8 per cent to $16,376 and Ether fell as much as 9.2 per cent.

FTX.com’s bankruptcy filing capped a swift reversal of fortune for the crypto exchange led by Mr Bankman-Fried.

Pinduoduo and JD.com jumped in US trading amid growing optimism Beijing is on its way to ending the crippling Covid Zero policy.

China reduced the amount of time travellers and close contacts must spend in quarantine.

Updated: November 12, 2022, 5:15 AM
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