Asia shares, bonds rally as Powell feeds hopes of end to rate hikes -November 01, 2023 at 10:04 pm EDT

* Markets trim bets on Dec, Jan rate hikes

* Markets now see rate cuts beginning June 2024

* Apple results later in the day; U.S. nonfarm payrolls on
Friday

SYDNEY, Nov 2 (Reuters) – Asian shares and bonds
extended a global rally on Thursday as a non-committal Federal
Reserve Chair had markets double down on bets 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 Cupertino California-based company is
expected to report a 1% decrease in quarterly revenue.

MSCI’s broadest index of Asia-Pacific shares outside Japan
surged 1.7% to the highest level in one week.
Tokyo’s Nikkei gained 1.4% to cross the 32,000 level for
the first time in two weeks.

China’s blue chips were 0.3% higher, while Hong
Kong’s Hang Seng index jumped 1.7%.

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

Overnight, the Fed held the policy rate steady in its
current 5.25%-5.50% 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 about 22% and a January move to 28%.
Markets have priced in a 70% chance that the tightening is over
and rate cuts could amount to 85 basis points next year,
beginning as soon as June.

Wall Street and Treasuries rallied. The S&P 500
gained 1% and the Nasdaq Composite surged 1.6%.

The benchmark 10-year Treasury yield eased
another 2 basis points to 4.7089%, the lowest in more than two
weeks. Overnight, it tumbled 14 basis points, the biggest daily
drop since March, also in part due to a Treasury announcement
that said the government will slow increases in the size of its
longer-dated auctions.

“While growth was incredibly strong in the third quarter of
2024 at 5%, we suspect a substantial slowing in 4Q24, 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.

“Instead the FOMC is happy to remain on hold, and watch
and see how the economy evolves early next year.”

The next big focal point for the market is the non-farm
payrolls data on Friday, which analysts expect to show the
economy added 180,000 jobs in October, slowing from 336,000
increase the previous month. It will come after private payrolls
increased far less than expected.

The dollar was again on the back foot on Thursday,
falling 0.1% against its peers. The prospect that the Fed is
done tightening buoyed risk sensitive currencies the most, with
Australian dollar bouncing 0.6% to a three-week high of
$0.6428.

“Although the FOMC may not be talking about it today, within
a few months, the question will no longer be ‘Will they hike
again?’ but ‘When will they cut?’,” said Seema Shah, Chief
Global Strategist at Principal Asset Management.

The yen continued to regain ground – up 0.3% to
150.46 per dollar on Thursday. It had hit a one-year low after a
Bank of Japan decision to ease its control over the 1% cap on
10-year yields, with the tweak seen insufficient to close the
wide interest rate gaps between Japan and other countries.

Oil prices traded higher as the conflict in the Middle East
kept investors on edge about whether it could disrupt oil
supplies. Brent crude futures climbed 1.2% to $85.61 a
barrel while U.S. West Texas Intermediate futures were at
$81.43 a barrel, up 1.2%.

The price of gold was 0.2% higher at $1,985.86 per
ounce.

(Reporting by Stella Qiu; Editing by Edwina Gibbs)