Asian Shares Rally On Rate Cut Optimism

(RTTNews) - Asian stocks rose on Thursday to hit five-month highs as the dollar eased and Treasury yields dipped to seven-month lows on bets for aggressive interest rate cuts by the Federal Reserve.

As inflation fears ebb, futures now imply an 88 percent chance of a 25 bps Fed rate cut as early as March, followed by two consecutive 25bp cuts in May and June.

Gold climbed to a three-week high in Asian trade while edged up slightly, after having dropped nearly 2 percent on Wednesday as concerns over supplies eased.

Chinese shares posted strong gains, led by a rebound in online gaming stocks. The benchmark Shanghai Composite index jumped 1.38 percent to 2,954.70 while Hong Kong's Hang Seng index soared 2.52 percent to 17,043.53.

Japanese shares slipped into the red on yen strength. The currency inched closer to a five-month peak it touched earlier this month as the dollar nursed steep losses against major currencies.

The Nikkei average dropped 0.42 percent to 33,539.62 while the broader Topix index settled 0.14 percent lower at 2,362.02 after four straight sessions of gains.

Shipping firms led losses while DIC Corp topped the gainers list to close 6.7 percent higher at 2,694 yen.

Economic indicators garnered investor interest earlier in the day, with retail sales rising 5.3 percent year-over-year in November while industrial production declined 0.9 percent in the month.

Meanwhile, BOJ Governor Kazuo Ueda said in an interview published on Wednesday that he was in no rush to unwind the central bank's ultra-loose monetary policy.

Seoul stocks rose for a third day, with the Kospi average climbing 1.60 percent to 2,655.28, marking an almost five-month high on the back of strong foreign and institutional buying.

Data revealed earlier in the day that South Korea's industrial output rebounded last month due to a double-digit increase in semiconductor production.

Battery shares, automakers and banks paced the gainers, with Hyundai Motor, Kia, Samsung SDI, Shinhan Financial Group and KB Financial Group rising 3-4 percent.

Australian markets closed near two-year highs as higher iron ore prices spurred a rally in the mining sector. Lower yields also boosted technology stocks.

The benchmark S&P ASX 200 rose 0.70 percent to 7,614.30 while the broader All Ordinaries index ended 0.71 percent higher at 7,852.10.

Across the Tasman, New Zealand's benchmark S&P NZX-50 index ended up 0.77 percent at 11,768.68.

U.S. stocks eked out modest gains overnight as the yield on the ten-year note fell to its lowest level in five months after a strong auction, adding to optimism that the Fed will start cutting interest rates soon.

The Dow inched up 0.3 percent to reach a new record closing high, while the tech-heavy Nasdaq Composite and the S&P 500 gained 0.2 percent and 0.1 percent, respectively to hit their best closing levels in almost two years.