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Asia shares, bonds soar amid hopes of end to rate hikes

Asian shares

MSCI’s broadest index of Asia-Pacific shares outside Japan soared 1.7 per cent to the highest level in one week

Asian shares and bonds extended a global rally on Thursday as a non-committal Federal Reserve Chair had markets double down on speculations that U.S. interest rates have peaked and cuts are on the way.

Investors are now awaiting the results from Apple later in the day, a bellwether for consumer demand and the tech sector. The tech company is expected to report a 1 per cent decline in quarterly revenue.

MSCI’s broadest index of Asia-Pacific shares outside Japan soared 1.7 per cent to the highest level in one week. Tokyo’s Nikkei added 1.4 per cent to surpass the 32,000 mark for the first time in two weeks.

China’s blue chips were 0.3 per cent higher, while Hong Kong’s Hang Seng index climbed 1.7 per cent.

Stock futures in Europe and U.S. also advanced. EUROSTOXX 50 futures increased 0.8 per cent early in Asia, while S&P 500 futures gained 0.3 per cent and Nasdaq futures rose 0.5 per cent.

Overnight, the Federal Reserve held the policy rate steady in its current 5.25 per cent-5.50 per cent range. While Chair Jerome Powell did not rule out another hike, markets judged he was not quite as hawkish as he might have been.

Fed funds futures rallied as markets pared back the risk of a December hike to nearly 22 per cent and a January move to 28 per cent. Markets have priced in a 70 per cent probability that the tightening is over and rate cuts could amount to 85 bps in 2024, starting as soon as June.

Wall Street and Treasuries rallied. The S&P 500 added 1 per cent and the Nasdaq Composite soared 1.6 per cent.

The benchmark 10-year Treasury yield eased another 2 bps to 4.7089 per cent, the lowest in over two weeks. Overnight, it slipped 14 bps, the biggest daily decline since March, also in part because of a Treasury announcement that said the government will slow increases in the size of its longer-dated auctions.

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