Asian stocks rise with year-end cheer; dollar heavy
By Rae Wee
SINGAPORE (Reuters) — Asian stocks rose broadly on Wednesday, tracking a rally from Wall Street as investors latched on to the year-end optimism driven by expectations that the Federal Reserve could begin cutting rates as early as next March.
As traders wind down with few critical economic data releases scheduled between now and the end of the month, the market mood continues to be dominated by the prospect that major central banks globally could begin easing rates in 2024, with the Fed taking the lead.
Those bets have spurred a bout of risk taking and driven a rally in global equities, with MSCI's broadest index of Asia-Pacific shares outside Japan last up 0.6%.
The index was on track for a 2.3% gain this month and looked set to end the year roughly 2.5% higher, having clocked a 20% decline in 2022 — its worst performance since 2008.
Japan's Nikkei rose 1.2%, while Hong Kong's Hang Seng Index was last up 0.9% in its first trading day after being closed for the Christmas and Boxing Day holidays.
Market pricing now shows a more than 80% chance the Fed is likely to begin cutting rates next March, according to the CME FedWatch tool, with over a 150 basis points of easing priced in for all of 2024.
«One of the most notable developments of 2023 came at the end of the year when the Federal Open Market Committee (FOMC) delivered a surprisingly dovish signal at its December meeting,» said Tim Murray, a capital markets strategist in the multi-asset division at T. Rowe Price.
«This is a big deal. We spent 2023 fearing that the impacts of tight monetary policy would drag the economy into recession. Happily, that did not happen, and a more dovish Fed means the likelihood of recession in 2024 has fallen considerably.»
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