Asian markets up on hopes China lifts COVID-19 restrictions

SYDNEY Asian shares went up on Monday as investors hoped that the unwinding of the Pandemic restrictions in China would help to brighten the outlook for global growth and commodity demand, even if full freedom could be months away.

Oil prices went up as the countries OPEC reiterated their output targets ahead of a European UnionEuropean Union ban and price caps on Russian crude, which kicks off on Monday.

On Sunday, more Chinese cities announced the easing of coronaviruses curbs as Beijing tries to make its zero-COVID policy more targeted and less burdensome after recent protests against restrictions.

Taylor Nugent, an economist at NAB, said that the easing of restrictions does not mean a wholesale shift away from the dynamic COVID zero strategy, but it is more evidence of a shifting approach and financial markets look to focus on the longer term outlook over the near-term hit to activity.

After rallying 3.7 per cent last week to a three-month top, the broadest index of Asia-Pacific shares outside Japan added 0.2 per cent.

Japan's Nikkei was near flat, while South Korea dipped 0.1 per cent. S&P 500 futures slipped 0.2 per cent, while Nasdaq futures fell 0.1 per cent.

Markets lost some momentum last week after November's robust U.S. payrolls challenged hopes for a less aggressive Federal Reserve, though Treasuries ended last week with solid gains.

Since November, 10 year note yields have fallen 74 basis points, effectively negating much of the tightening of the Fed's last outsized hike in cash rates.

Markets are betting that Fed rates will top out at 5 per cent and the European Central BankEuropean Central Bank around 2.5 per cent.

The risks are moving toward higher than anticipated terminal rates for both the Fed and the ECB due to the recent easing of financial conditions in the U.S. and Euro area labor demand, according to Bruce Kasman, head of economic research at JPMorgan.

The Fed will deliver a higher than 5 per cent rate forecast at its upcoming meeting and that Chair Jerome Powell's press conference will shift to more open-ended guidance regarding any near-term ceiling on rates because of the combination of labour market resilience and sticky wage inflation. The Fed meets on December 14 and the ECB the day after. Speaking on Sunday, French central bank chief Francois Villeroy de Galhau said he favoured a hike of half a point next week.

Central banks in Australia, Canada and India are expected to raise their rates at meetings this week.

The dollar fell 1.4 per cent last week after falling to its lowest since June on a basket of currencies, as a result of the steep fall in U.S. yields.

It lost 3.5 per cent on the yen alone, and last traded at 134.39, leaving October's peak of 151.94 a distant memory. The euro was at $1.0536, having increased by 1.3 per cent last week to its highest since early July.

The drop in the dollar and yields has been a boon for gold, which was hovering at $1,797 an ounce after rising 2.3 per cent last week to touch a four-month high.

Oil prices bounced after OPEC agreed to stick to its oil output targets at a meeting on Sunday.

The Group of Seven and European UnionEuropean Union states are expected to impose a $60 per barrel price cap on Russian seaborne oil on Monday, though it was not yet clear what impact this would have on global supply and prices.

Brent gained $1.14 to $86.71 a barrel, while U.S. crude rose $1.00 to $80.98 per barrel.