Asian investors extended Wall Street’s rally on Tuesday, buoyed by expectations that the Federal Reserve will soon pause interest rate hikes. A successful auction of U.S. Treasuries and speculation that the Fed could cut interest rates as early as next year further fuelled the gains.
Asian stocks followed Wall Street stocks higher on Tuesday.
Investors are betting that the Federal Reserve will end interest rate hikes and could cut rates in 2024.
The successful sale of 20-year U.S. Treasuries eased Treasury yields and boosted risk sentiment.
The dollar fell against the euro and sterling as expectations of a U.S. rate hike weakened.
Hong Kong’s Hang Seng Index jumped 1.5 per cent, led by a 3 per cent rise in tech giant Alibaba.
The Shanghai Composite gained 0.6 per cent and Tokyo’s Nikkei 225 fell 0.2 per cent as the yen strengthened.
The US dollar index weakened slightly against a basket of major currencies.
Fed policy outlook:
Investors are closely watching the Federal Reserve’s next policy meeting in December for clues about its future interest rate path.
Fed officials have signalled that they are nearing the end of their rate hike cycle.
Some market participants are even betting on a rate cut in the second half of 2024.
Positive sentiment in Asian markets reflects a growing belief that the Fed’s tightening cycle is nearing its end. This optimism supported risk assets and helped weaken the US dollar. However, investors remain cautious and will continue to closely monitor the Fed’s policy signals.