news/AMZN/2023.01.05/Stocks stall as firm Fed reins in China rally.txt

*Fed rebuttal of rate cut bets keeps Europe's stocks
subdued*Hang Seng touches six-month top, yuan sets four-month high*Oil bounces after heavy slide on recession angst*Benchmark government bond yields tick higher after fallsLONDON, Jan 5 (Reuters) - Wall Street was set to tap the
brakes on Thursday as upbeat jobs data after a firm message from
the Fed that it won't be cutting interest rates any time soon
offset China's latest reopening plans.News that China's mainland border with Hong Kong will be
reopened after three years had sent Asian-Pacific shares outside
Japan to a four-month high overnight, but with
both the dollar and bond market borrowing costs creeping up,
Europe couldn't keep up.The pan-European STOXX was fractionally lower after
gaining more than 3% in its first three sessions of 2023 while
Wall Street futures pointed to modest falls there too.London's FTSE did manage a respectable 0.5% rise as
better-than-expected numbers from retail giant Next
lifted the entire European sector, but it barely made up
for a groggy Frankfurt and Paris."Everyone expected a hawkish message from the Fed and that
is what we got," said MUFG's Head of Research for Global Markets
EMEA, Derek Halpenny."Really it's now about payrolls (U.S. jobs data) tomorrow,"
he added, explaining that the labour market will be a big factor
in how high inflation remains this year."A strong print tomorrow and I think you are going to get a
fairly rapid repricing for a 50 bps hikes at the next (Fed)
meeting."Investors were already digesting their pre-payrolls
appetiser, the ADP National Employment report, which showed the
private sector added more jobs in December than a month ago. It
came a day after a moderate fall in U.S. job openings too.Markets are clearly being tugged in different directions
though. Amazon.com jumped 2.8% in premarket trading
after it had announced plans to layoff more than 18,000 staff.China too has abruptly dropped ultra-strict curbs on travel
and activity, fanning hopes that once the infection waves pass,
its giant economic motors can start firing again and offset the
slowdowns in other parts of the world.Thursday's biggest Asian gains included E-commerce and
consumer stocks in Hong Kong thanks to the China mainland border
news, which drove the Hang Seng to a six-month high.The yuan also rose about 0.2% to 6.8750 to a
four-month high and also supported other currencies such as the
Thai baht which, as Thailand is now expected to see a
mass return of Chinese holidaymakers, has surged nearly 14% in
less than 3 months."China reopening has a big impact ... worldwide," said
Joanne Goh, an investment strategist at DBS Bank in Singapore,
since it not only spurs tourism and consumption but can ease
some of the supply-chain crunches seen during 2022."There will be hiccups on the way," Goh said, during an
outlook presentation to reporters. "We give it six months
adjusting to the process. But we don't think it's reversible."RATES WARNINGChina's central bank also said overnight it will step up
financing support to spur domestic consumption and key
investment projects and support a stable real estate market.It has eased an unofficial ban on Australian coal imports in
recent days as well and the Australian dollar made a
three-week high overnight just below $0.69. It last bought
$0.6818.Oil rebounded too after posting the biggest two-day loss for
the start of a year in three decades.Brent crude was last up $1.49, or 1.9%, to $79.32 a
barrel, while U.S. West Texas Intermediate crude futures
gained $1.40 to $74.27 an unexpected shutdown of a major U.S.
fuel pipeline also lifted prices."This morning's rebound is due to the shutdown of Line 3 of
the Colonial pipeline," said Tamas Varga of oil broker PVM.
"There is no doubt that the prevailing trend is down," though he
added. "It is a bear market".Wall Street futures were down 0.3% after the jobs data.
Minutes from the Federal Reserve's December meeting, published
on Wednesday, had contained a pointed rebuttal against rate cuts
bets that traders have priced in for late in the year.Fed committee members noted that "unwarranted easing in
financial conditions" would complicate efforts to restore price
stability."Translating Fed speak, this is a warning to markets, that
being too optimistic may ironically backfire," said Vishnu
Varathan, Mizuho Bank's head of economics in Singapore."That is, insofar that premature rate cut bets drive looser
financial conditions, the Fed may have to tighten even more to
compensate."Fed funds futures pricing shows traders think the benchmark
U.S. interest rate will peak just below 5% in May or June,
before being cut back a little bit in the second half of 2023.Benchmark 10-year Treasury yields - which move inverse to
price - were fractionally higher at 3.74% in Europe
but still down nearly 10 basis points (bps)on the week.Germany's 10-year government bond yield was last
up 3 bps at 2.32%. It too though has fallen nearly 25 bps this
week after closing out 2022 at its highest level since 2011.Preliminary inflation data from Germany, France and Spain
all showed this week that consumer prices rose at a slower pace
in December than November, following an easing in energy price
rises.In currency markets, the dollar has been wobbly as investors
navigate between the Fed's hawkish tone and the support for
riskier currencies driven by China's reopening.It was pinning down the yen again at 133.45 per
dollar, cutting the wagers that Japan's ultra-easy monetary
policy will be finally tightened this year.In Europe, unseasonably warm weather has disappointed skiers
but been a boon for a euro basking in falling gas
prices. Benchmark Dutch gas prices fell to 14-month
lows overnight and the euro was down 0.3% at $1.0568.(Additional reporting by Tom Westbrook in Singapore, Editing by
William Maclean and David Evans)