Asian stocks join global rally and dollar drops on Fed rate joy

Jerome Powell signalled the December gathering would likely see officials lift borrowing costs 50 basis points, having pushed them up by a bumper 75 points at the past four meetings.

Asian stocks extended a global rally on December 1 and the dollar fell after Federal Reserve boss Jerome Powell flagged a slowdown in the pace of interest rate hikes and China opened the way for a softer approach to fighting COVID-19.

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 on November 30, Mr. 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 December gathering would likely see officials lift borrowing costs 50 basis points, having pushed them up by a bumper 75 points at the past four meetings.

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

Analysts said the reaction to Mr. 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 in 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.