Most Federal Reserve officials believe the central banks should slow the pace of interest rate hikes, minutes from its latest gathering earlier this month showed. The minutes, released Wednesday, support expectations the Fed will raise rates by 50 basis points in December, ending a run of jumbo 75 basis point increases. Stocks rallied and the dollar fell toward a three-month low on the news.

Asian stock markets looked poised for a cautious open as Federal Reserve officials warned of more pain to come as they raise interest rates to fight inflation. Equity futures indicated tepid moves as trading starts in Australia and Japan after the S&P 500 and the tech-heavy Nasdaq 100 declined for the second straight session. Contracts for Hong Kong were higher after a gauge of US-listed Chinese shares notched its fifth gain in six days as investors react to more market-friendly policy signals from Beijing.

Stocks skyrocketed in a buy-everything relief rally after slower-than-projected price growth spurred bets that the Federal Reserve can downshift its aggressive rate-hike path. The S&P 500 climbed 5.5% and Treasuries soared, sending the rate on two-year notes, more sensitive to monetary policy, down 25 basis points.

Rates traders downgraded the odds of another three-quarter-point rate increase in December almost to nil. The stocks rally is set to roll on in Asia, with futures for for Hong Kong, Japan and Australia all pointing to large gains.

US inflation fell in October by more than forecast, perhaps giving the Federal Reserve room to maneuver as it considers smaller interest-rate hikes, something it has said was possible in the coming months. More importantly for the central bank, the core measure that excludes food and energy also slowed more anticipated.

Americans head to the polls on Tuesday for midterm elections to decide control of both chambers of Congress, the governorship in 36 states, and countless other local races and ballot initiatives. Democrats risk losing their House majority to Republicans but are seeking to keep their narrow hold on the Senate.

Markets will watch the latest US inflation reading on Thursday after the core consumer price index rose more than forecast to a 40-year high in September. Even if prices begin to moderate, the CPI is far above the Federal Reserve’s comfort zone.

COP27, the first United Nations climate change conference to be held in Africa in six years, started Sunday in the Egyptian Red Sea resort of Sharm El-Sheikh. The summit takes place in the shadow of the Russia-Ukraine war, which has sparked global food and energy supply crises. 

Photo: Richard Drew | Associated Press

Renewed fears that Federal Reserve interest rate hikes may trigger a global recession looked set to weigh on Asian stocks Friday, with equity futures for Japan pointing to a hefty drop after the S&P 500 saw its fourth straight decline. The slump in stocks came as a key segment of the Treasury yield curve reached new extremes of inversion, touching a level not seen since the 1980s. The Bank of England Governor Andrew Bailey said turmoil hitting the UK this year is worse in economic terms than anything that struck in the 1970s.