The euro, pound and yen all held their gains against the dollar Thursday and most equities rose as traders grow increasingly hopeful the Federal Reserve will slow its pace of interest rate hikes.
Hong Kong led the gains thanks to a surge in tech firms, extending a recovery from Monday's rout that was fuelled by worries of Xi Jinping's tightened grip on power in China.
After a painful year for markets hit by central bank rate hikes to fight soaring inflation, investors have taken heart from several weak US indicators — the latest on the services and real estate sectors — suggesting the economy is slowing.
That has led to speculation officials could be ready to tap the brakes on the increases, while some Fed policymakers have also raised the possibility of a slowdown.
The optimism was boosted Wednesday by news that the Bank of Canada had raised rates less than expected and signalled it is ready to wind down.
"The downshift at the Bank of Canada has further fanned the winds of a similar move by the Fed come December and comes after the (Australian central bank) slowed the pace of hikes to 25 basis points at its October meeting," said National Australia Bank's Taylor Nugent.
The news weighed on the dollar, which has surged against other currencies all year owing to the Fed's rate drive, as US Treasury yields drop.
And on Thursday the euro held above parity with the greenback, a day after breaking the marker for the first time since last month and ahead of an expected European Central Bank rate hike.
The ECB meeting "really depends on not what (it) delivers, but what sort of guidance… President Christine Lagarde offers over future moves going forward for December, at a time when EU inflation is still showing little sign of slowing," said Micahel Hewson of CMC Markets.
The yen held around 146 per dollar, having hit a 32-year low near 152 on Friday, and sterling was also holding above $1.16 after last month hitting a record low $1.0350 in reaction to then-prime minister Liz Truss's debt-fuelled mini-budget.
The pound was also enjoying support after former finance minister Rishi Sunak became prime minister, giving hope for some stability after months of upheaval.
The positive performance was mirrored in equity markets, with Hong Kong rising one percent at one point thanks to a rally in beaten-down tech shares.
The Hang Seng Index's advance follows a rout on Monday in response to Xi's tighter grip on power and his decision to put in top posts loyalists who backed his zero-Covid strategy of lockdowns.
Among the standout performers, ecommerce giant Alibaba jumped more than eight percent and rival JD.com piled on more than 10 percent. The Hang Seng Tech Index was four percent higher.
The advances came after outsized gains for the firms' New York-listed shares.
Sydney, Seoul, Singapore, Taipei, Manila, Bangkok, Mumbai, Jakarta and Wellington also rose. However, Tokyo and Shanghai slipped.
London edged up in the morning but Paris and Frankfurt eased back.
Analysts remain cautious owing to the fact inflation is stuck at multi-decade highs in various countries, while the Fed's November meeting is now in focus.
"The Fed won't blink next week and the risk of a 75 basis point hike in December should still remain on the table," said OANDA's Edward Moya.
"Cracks in the economy are here. Tighter financial conditions are not going away. Meanwhile, inflation and labour stats are not declining fast enough to support a Fed downshift just yet," he said, adding that there was a risk of overtightening.
"The soft landing playbook just got thrown out the window and now Wall Street needs to gauge how bad of a recession will hit the economy next year."
Oil prices dipped after Wednesday's rally that came after US Secretary of State Antony Blinken warned that there was little scope for a new Iran nuclear deal, pointing to the clerical leadership's conditions.
Hong Kong finance chief contracts Covid ahead of banking summit
Hong Kong (AFP) Oct 27, 2022 –
Hong Kong's finance chief could have to miss an upcoming global banking summit in the city, after his office revealed Thursday he had tested positive for the coronavirus.
City authorities are eager for the international finance get-together to show Hong Kong is open for business, having been previously isolated by China's zero-Covid policy.
Financial Secretary Paul Chan was scheduled to deliver speeches next Wednesday and Thursday at the conference, which is set to draw about 200 participants and the heads of 30 major financial institutions.
But it is now unclear if Chan will be able to attend.
He had been visiting Bahrain and Saudi Arabia to build trade ties and was scheduled to return Thursday.
But he tested positive under a rapid antigen test in Riyadh, his office said.
"(Chan) has cancelled the remaining parts of the visit and will stay in Riyadh for a short while, and seek to comply with relevant health requirements and return to Hong Kong as soon as possible," it said in a statement.
The office did not immediately respond to AFP questions about his updated itinerary.
Hong Kong has gradually relaxed its pandemic controls, including scrapping mandatory quarantine for new arrivals last month.
But it still maintains many strict curbs long abandoned by much of the world, including rival business hubs.
International arrivals must undergo multiple tests and cannot enter bars or restaurants for the first three days.
Under Hong Kong's current rules, those who test positive for the coronavirus must isolate at home or in a hotel room, or a government isolation centre.
They may leave isolation after a week if they have tested negative on days six and seven.
Global banking chiefs will have a taste of Hong Kong's existing pandemic curbs next week at the summit in the Four Seasons hotel, although certain rules will be relaxed.
Attendees will not be able to go to bars or restaurants during the first three days after arriving but will be able to socialise in a bubble within the hotel and attend an opening banquet at an art museum.
The event will include panel talks featuring the CEOs of Goldman Sachs, Morgan Stanley and Citigroup.
Top executives from HSBC, Standard Chartered, JPMorgan Chase and BlackRock will also attend.
