Asian stocks follow Wall Street higher; yields and dollar down

Asian stocks broadly rallied on Thursday, after the US Federal Reserve flagged the end of its tightening cycle and struck a dovish tone for the year ahead.

US Treasury yields slid to a fresh four-month trough, while the dollar continued to slide.

MSCI's broadest index of Asia-Pacific shares outside Japan shot up 1.8%, its biggest one-day percentage jump in a month.

Mainland Chinese blue chips edged up by 0.2%, while Hong Kong's benchmark advanced 1.2%. Australian shares were up 1.6%.

However, Japan's Nikkei slid 0.7%, weighed down by the yen's sharp rally.

The Fed left interest rates unchanged on Wednesday and US central bank chief Jerome Powell said its historic tightening of monetary policy is likely over with inflation falling faster than expected.

A near-unanimous 17 of 19 Fed officials project that the policy rate will be lower by the end of 2024 than it is now - with the median projection showing the rate falling three-quarters of a percentage point from the current 5.25%-5.50% range. US fed funds futures boosted the chances of rate cuts starting as soon as in March after the Fed decision, according to LSEG's FedWatch. The market has priced in more than 150 bps of easing next year.

"It was a very aggressive pivot," said Ben Luk, global macro strategist at State Street Asia Limited.

"The Fed has followed market expectation in terms of allowing for one more rate cut to be added into both the 2024 and the 2025 (outlooks)," he said.

That aggressive pivot will have a mixed impact in Asia, with tech shares to benefit more while markets including Japan will have a dampening effect as its currency strengthens with a weakening US dollar, he added.

"Overall, the meeting was a bit more dovish than we expected," said Christian Scherrmann, US economist at DWS.

"However, we would like to remind that they are not yet on autopilot to the runway and that the timing of the first rate cuts still depends on the evolution of the incoming data and, in particular, of inflation," he added.

It is a busy week for central banks, with the European Central Bank, Bank of England and Swiss National Bank all announcing policy decisions on Thursday. The Bank of Japan's turn comes on Tuesday.

US stocks surged to a sharply higher close on Wednesday and benchmark Treasury yields slid to their lowest level since 10 August.

US stock futures, the S&P 500 e-minis, were up 0.4% on Thursday, while the 10-year Treasury yield pushed down further to as low as 3.9845%, breaking below the psychological 4% mark.

The US dollar index , which measures the greenback against a basket of currencies, fell a further 0.25% to 102.62.

The euro gained 0.2% to $1.0899.

The yen sat significantly higher, with the dollar sliding 0.7% to 141.82 yen .

Spot gold was up 0.23% at $2,030.99 per ounce, after rising 2.4% on Wednesday.

Oil prices rose, extending gains from the previous session.

Brent futures rose 23 cents, or 0.31%, settling at $74.49 a barrel by 0345 GMT. US West Texas Intermediate crude rose 11 cents, or 0.16%, and settled at $69.58 a barrel.