MSCI's broadest index of Asia-Pacific shares to soar 3% this year

MSCI's broadest index of Asia Pacific shares outside Japan rose at the close today Wednesday، more than 1% to an over four-month high as it was on track for a 2.8% gain this month and looked set to end the year nearly 3% higher، after having declined more than 20% in 2022، its worst performance since world financial crisis in 2008.

MSCI's broadest index of Asian stocks is tracking a rally from Wall Street

MSCI's broadest index of Asian stocks، representig Asia-Pacific shares outside Japan، increased 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 Council could begin cutting rates as early as next March.

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، soared with Hong Kong's Hang Seng Index rose 1.5% in its first trading day after being closed for the Christmas and Boxing Day holidays and Chinese blue chips eked out a marginal gain of 0.2%، while Japan's Nikkei ended more than 1% higher.

Major central banks globally could begin easing rates in 2024

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، pushing MSCI's broadest index of Asian stocks، representig Asia-Pacific shares outside Japan، to earn more this year.

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 rising more than 1% to the highest level since last July.

MSCI's broadest index of Asia-Pacific shares was on track for a 2.8% gain in December

MSCI's broadest index of Asia-Pacific shares outside Japan was on track for a 2.8% gain in December and looked set to end the year nearly 3% higher، having clocked a 20% decline in 2022، its worst performance in more than 15 years.

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.

Federal Open Market Committee (FOMC) delivered a surprisingly dovish signal

Tim Murray، a capital markets strategist in the multi-asset division at T. Rowe Price، indicated that 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.

He affirmed that this is a big deal as the traders and experts spent 2023 fearing that the impacts of tight monetary policy would drag the economy into recession، but happily، that did not happen، and a more dovish Fed means the likelihood of recession in 2024 has fallen considerably.

Other Stocks gain with MSCI's broadest index of Asia-Pacific shares

Other than MSCI's broadest index of Asia-Pacific shares، Stocks in Europe and Britain likewise looked set to extend the optimism، with EUROSTOXX 50 futures gaining 0.5% and FTSE futures last 0.4% higher، while S&P 500 futures and Nasdaq futures were meanwhile little changed.

In the currency market، the dollar remained on the back foot and languished near a five-month low against a basket of currencies and a four-month trough against the euro but the common currency last bought $1.1032.

Policymakers remain divided over monetary stance in Japan

The yen slipped more than 0.1% to 142.58 per dollar، with a summary of opinions from this month's Bank of Japan (BOJ) policy meeting showing that policymakers remain divided over if، and when، the central bank should move away from its ultra-loose monetary stance.

The summary released on Wednesday showed that the board agreed to maintain massive stimulus for the time being، while the nine members were split between those who were cautious about raising interest rates، and others who saw the need to start preparing for a future exit.

Upside inflation risks remained small، thus there was no need for rapid tightening in Japan

Alvin Tan، head of Asia FX strategy at RBC Capital Markets explained that the BOJ minutes sounded dovish with some members noting that upside inflation risks remained small، thus there was no need for rapid tightening in Japan.

Concerning oil market، Brent crude futures and U.S. WTI crude futures slipped، as Brent fell 10 cents to $80.97 a barrel، while U.S. crude lost 17 cents to $75.40، though stood not too far from their respective one-month highs hit in the previous session since further attacks on ships in the Red Sea prompted fears of shipping disruptions and force ships to reroute around Africa via the Cape of Good Hope.