Following further dovish comments from Federal Reserve officials, Asian shares increased on Thursday as traders awaited the release of the US consumer price inflation report later in the day for additional monetary policy cues.
In Europe, with FTSE futures up 0.4% and EUROSTOXX 50 futures up 0.3%, the surge is expected to continue. Nasdaq futures and S&P 500 futures both increased by 0.3%.
MSCI's broadest index of shares in the Asia-Pacific region outside of Japan increased by 0.9% to reach its highest point in three weeks. Nikkei in Tokyo increased 1.7%, moving up from the five-month low it reached last week.
Confidence in the larger market was boosted by the news that Central Huijin Investment, a Chinese government fund, had increased its position in the top four banks of the nation. The Hang Seng index of Hong Kong increased by 2.0%, and the CSI300 index of Chinese blue chips increased by 0.8%.
However, China has also published a notice forbidding domestic brokerages and associated overseas subsidiaries from acquiring new mainland clients for offshore trading, which will limit capital outflows.
With tighter financial markets and erratic data creating risks to growth and prompting policymakers to prolong a rate pause last month, the Fed minutes revealed a rising feeling of anxiety about the direction of the U.S. economy. This led Wall Street to end higher overnight.
More Federal officials' comments recently suggesting that US interest rates may have peaked are also largely responsible for the current uptick in sentiment. These remarks prompted a welcome decline in Treasury yields.
Governor of the US Federal Reserve, Christopher Waller, stated on Wednesday that rising market interest rates may aid the Fed in controlling inflation and enabling it to "watch and see" whether or not it needs to raise its own policy rate once more.
Waller has been one of the most outspoken supporters of raising interest rates to combat inflation, and last week's similar remarks by Federal Vice Chair Philip Jefferson as well as Dallas Federal President Lorie Logan gained more support as a result of his views.
Although the dollar slipped close to a two-week low, the yen's value is still under stress at 149.09 to the dollar, barely a hair's breadth below the 150 mark that would prompt intervention by Japanese authorities.
The probability of a Fed raise in November was further reduced by the markets to just 9%, from 13.2% the day before. Based on the CME FedTool, there's a 70% likelihood that the rate has already reached its peak.
Traders are preparing for the crucial US consumer inflation report that is scheduled for release later on Thursday as the Fed's long-awaited turn draws closer. Due to producer price inflation data that was hotter than anticipated on Wednesday, the risks are higher.
Economists anticipate that the headline consumer price index (CPI) would have increased by 0.3% on a monthly basis in September, dropping from 0.6% in August, while the core CPI is predicted to remain stable at 0.3%.
Although geopolitical concern was likely to prevent bond markets from trading too bearishly on better data, Alan Ruskin, the chief international strategist from Deutsche Bank, said that an upside surprise in the core rate of 0.4% or higher would catch investors off guard.
A 0.4% m/m core figure would probably have a longer-term effect on the data since it would suggest that the two most significant data releases for September would both support the Fed's policy of remaining hawkish, the economist added.
The continued violence in the Middle East contributed to some demand for safe haven assets, which helped long-dated treasury rates decline for a third session in a row.
Following a 16-year peak of 4.8870%, ten-year rates on Thursday decreased by 3 basis points to 4.5706%.
Due to supply disruptions from the fighting between the Palestinian Islamist group Hamas and Israel, oil prices continued to fall on Thursday, although top OPEC producer Saudi Arabia offered to help stabilize the market.
After falling 2% the day before, Brent futures dipped 0.3% to $85.56 per barrel. After falling 2.9% on Wednesday, US West Texas Intermediate crude decreased by 0.5% to $83.08.