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Asian stocks surge as markets bet on a change in Federal Reserve policy; focus on US inflation.

Asian Shares Rally as Markets Bet on Fed Pivot; US Inflation in Focus

Asian Shares Rise on Dovish Fed Remarks

Asian shares climbed on Thursday as investors speculated that US interest rates have reached their peak, following more dovish comments from Federal Reserve officials. Traders eagerly awaited the US consumer inflation report for further insights into monetary policy. MSCI’s broadest index of Asia-Pacific shares outside Japan reached its highest level in three weeks, while Tokyo’s market rallied for a third consecutive day, rebounding from a five-month low. Hong Kong’s market jumped 1.8% due to a surge in banking shares after China’s state fund increased its stakes in major banks.

Wall Street Closes Higher on Fed Minutes

Wall Street closed higher after the release of the Federal Reserve minutes, which revealed a sense of uncertainty regarding the state of the US economy. The minutes indicated that volatile data and tightening financial markets pose risks to growth, leading policymakers to extend the rate pause. The recent positive sentiment can also be attributed to remarks from Fed officials suggesting that interest rates may have peaked, resulting in a decrease in Treasury yields.

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Dollar Remains Near Two-Week Low

The dollar settled near a two-week low, while the yen continued to face pressure. The yen’s value against the dollar came close to the intervention level set by Japanese authorities. Market expectations for a November Fed rate hike decreased to just 9%, and there is a 70% chance that rates have already peaked, according to CME FedTool.

Traders Brace for US Consumer Inflation Report

With the long-awaited pivot for the Fed in sight, traders are eagerly anticipating the US consumer inflation report. Following a higher-than-expected producer price inflation report, economists forecast a 0.3% increase in the headline consumer price index (CPI) for September. A core CPI rate of 0.4% or higher would catch investors off guard and potentially impact the Fed’s hawkish stance.

Treasury Yields Ease, Oil Prices Decline

Long-dated treasury yields eased for a third consecutive session, benefiting from safe-haven demand amid ongoing conflicts in the Middle East. Meanwhile, oil prices extended their declines as Saudi Arabia pledged to stabilize the market amid fears of supply disruptions. Gold prices, on the other hand, remained high, reaching their highest level in two weeks.

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Overall, Asian shares rallied on the expectation of a Fed pivot, while investors closely monitored US inflation data. The market sentiment was buoyed by more dovish remarks from Fed officials, leading to a decrease in Treasury yields. As traders eagerly awaited the US consumer inflation report, the dollar remained near a two-week low. Additionally, long-dated treasury yields eased, while oil prices declined due to concerns over supply disruptions.

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