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Wall Street stocks edge lower ahead of Powell remarks and jobs report

US stocks dipped on Tuesday, but the moves were modest as investors held off on making big bets ahead of remarks from Federal Reserve chair Jay Powell on Wednesday and November’s employment report set to be released on Friday.

Wall Street’s benchmark S&P 500 fell 0.2 per cent in the New York session while the tech-heavy Nasdaq Composite lost 0.6 per cent.

Powell will speak at The Brookings Institution amid uncertainty about the path forward for US monetary policy as some signs of cooling inflation emerge. The uncertainty has been evident in the minutes from the central bank’s November meeting as well as in recent remarks from officials including New York Fed president John Williams, St Louis president James Bullard and San Francisco president Mary Daly.

Investors in the futures market have priced in a roughly 70 per cent chance that the Fed will deliver a 0.5 percentage point increase at its meeting in December after four consecutive 0.75 percentage point moves.

“With Powell coming up tomorrow and the jobs coming, people are holding off on making big moves,” said Lou Brien, a strategist at DRW Trading.

The labour department’s employment report on Friday is expected to show that the US added 200,000 jobs in November, according to a Bloomberg survey of economists, a slowdown from the previous month. Williams at the New York Fed on Monday warned that US unemployment could rise from its current level of 3.7 per cent to between 4.5 per cent and 5 per cent by the end of next year.

The muted performance in US stocks contrasted with Chinese equities, which rebounded sharply on Tuesday as investors wagered that Beijing would press on with easing its tough Covid-19 policies despite the government’s commitment to keeping its hardline measures.

Hong Kong’s Hang Seng index soared 5.2 per cent following a 1.6 per cent fall in the previous session, while China’s CSI 300 added 3.1 per cent.

The moves came after the imposition of a fresh round of business closures and quarantines of close coronavirus contacts in Shanghai, and as the country reels from widespread demonstrations against President Xi Jinping’s stringent lockdown measures.

“The direction of reopening is very clear, in our view, and we don’t think the government will double down on pandemic control measures,” said Xiangrong Yu, an analyst at Citi.

“We maintain our base case that reopening will gain momentum post the National People’s Congress [in March] next year, and see higher risk of an accelerated reopening,” he said.

Although some of the “front-loading” by investors into Chinese equities with low valuations had reversed thanks to “skittish” market sentiment, China was likely to stick with its zero-Covid measures until at least next year, and despite the protests, said Mitul Kotecha, head of emerging markets strategy at TD Securities.

“Ultimately, there’s nothing here yet that changes the perspective of investors,” Kotecha added.

Elsewhere in equity markets, Europe’s regional Stoxx 600 fell 0.1 per cent, having lost 0.6 per cent on Monday, while London’s FTSE 100 added 0.5 per cent.

The two-year Treasury yield, which moves with interest rate expectations, rose 0.04 percentage points to 4.48 per cent, while the benchmark 10-year yield gained 0.07 percentage points to 3.75 per cent.

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