Asian shares and bonds surged Friday morning in Asia, extending a global rally as investors predict that the U.S. Federal Reserve may be nearing the end of its interest rate hike cycle.
MSCI index of Asia-Pacific shares outside Japan gained 1.7 percent to its highest level in a week. Tokyo's Nikkei rose 1.4 percent to cross 32,000 for the first time in two weeks, China's blue chips climbed 0.3 percent, and Hong Kong's Hang Seng jumped 1.7 percent.
Stock futures in Europe and the U.S. also rose, with EURO STOXX 50 futures up 0.8 percent, S&P 500 futures up 0.3 percent and Nasdaq futures up 0.5 percent. Australian and South Korean equities rose around one percent, while China gained two percent for the Golden Dragon index of U.S.-listed Chinese companies.
The Shanghai Composite Index SHCOMP gained 0.75 percent to 3,032 after closing at 3,009.41. Meanwhile, the Singapore FTSE Straits Times Index rose 2.15 percent to 3,148.80 after previously closing at 3,082.53.
The South Korean KOSPI Composite Index 180721 climbed 1.01 percent to 2,366.90 following the previous close of 2,343.12, while the S&P/ASX 200 Benchmark Index XJO increased 1.18 percent after closing at 6,899.70.
The rally followed the 1.9 percent rise for the S7P 500 on Thursday, its biggest one-day advance since April. However, U.S. equity futures ticked lower in Asian trading, weighed down by the expected one percent decrease in quarterly revenue. The Cupertino, California-based company will announce its results later in the day.
Wall Street and Treasuries rallied, with the S&P 500 gaining one percent and the Nasdaq Composite surging by 1.6 percent.
Markets in Japan are closed on Friday for a holiday, so trading in Treasuries in Asia will be closed for the day.
The yen slumped 0.07 percent to 150.34 after recovering to 150.46 per dollar on Thursday. Previously, the yen had hit a one-year low after the Bank of Japan's decision to ease its yield curve control program.
Market focus this week: FOMC meeting results, upcoming reports
The Fed held interest rates steady on Wednesday at the 5.25-5.50 percent range following the conclusion of the FOMC meeting. It signaled that it may be nearing the end of its rate-hike cycle. However, markets interpreted Fed Chair Jerome Powell's remarks as dovish, as he did not rule out another interest rate hike.
Markets priced in a 70 percent chance of tightening are over and could amount to 85 basis points of rate cuts beginning in June 2024.
"While growth was incredibly strong in the third quarter of 2023 at 4.9 percent, we suspect a substantial slowing in 4Q23, which, based on Powell's remarks today, likely won't be enough to garner additional tightening," Tiffany Wilding, an economist at PIMCO, wrote in a note to clients.
Long-dated Treasury yields fell on Thursday, with the benchmark 10-year yield easing two basis points to 4.7089 percent, its lowest level in over two weeks. Overnight, the 10-year yield tumbled 14 basis points, its biggest daily drop since March. Australian and New Zealand yields followed suit on Friday, declining five basis points to 4.74 percent.
UBS analysts forecast the 10-year Treasury yield to fall to 3.5 percent by June 2024, while other experts hold a more cautious view. Hedge fund K2 Asset Management predicts that the 10-year yield will rise to five percent, while Franklin Templeton says it could peak at 5.25 percent, the highest level since 2007.
The next primary market focus is Friday's non-farm payrolls report, which economists expect to show the economy added 180,000 jobs in October. This comes after private payrolls rose much less than expected, but the number of Americans who filed for unemployment benefits increased for the sixth week.
Australian retail sales unexpectedly grew in the third quarter, while shares in Macquarie Group rose despite the company reporting a drop in earnings. Elsewhere in Asia, retail sales data for Singapore and purchasing manager index data for India are due for release.
China Caixin services PMI, Eurozone unemployment report and Canada employment report will also drop on Friday.