Australia

Australian shares are set to edge higher at the open after Wall Street followed up Monday’s gains with another strong session. The US indices got a further boost Tuesday, after the surprise decision of the Reserve Bank of Australia to raise rates less than expected. The ASX closed yesterday nearly 4% higher, its biggest gain since 2020.

ASX futures were up 97 points or 1.4% at 6793 as of 7:00am on Wednesday, pointing to a gain at the open.

US stocks jumped again on Tuesday, extending a strong start to the fourth quarter and giving relief to investors after weeks of punishing losses.The Dow Jones Industrial Average advanced 2.8%, or more than 800 points, in afternoon trading. The S&P 500 surged 3.1%, and the technology-heavy Nasdaq Composite climbed 3.3%.

The gains built on Monday's rally, when the Dow posted its biggest one-day increase since June. Optimists hope that stocks might be poised for a broader recovery.

New data from the Labor Department showed that US job openings fell by 10% in August and layoffs rose slightly, signs that the labor market is starting to cool. While bad news for workers, such a slowdown could help reduce inflation and ease pressure on the Fed to keep lifting rates. On Monday, another closely watched report showed that growth in US manufacturing weakened to its lowest level in more than two years.

"If that trend continues, then the Fed will maybe start to pull off a little bit, in terms of the last few hikes that are priced into the market between now and early next year," said Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions.

In commodity markets, Brent crude oil rose 3% to $US91.52 a barrel, gold edged rose 1.5% to US$1,725.23.

In local bond markets, the yield on Australian 2 Year government bonds dropped to 3.13% while the 10 Year fell to 3.72%. Overseas, the yield on 2 Year US Treasury notes rose to 3.34% and the yield on the 10 Year US Treasury notes was up to 3.61%

The Australian dollar hit 64.86 US cents down from the previous close of 65.12. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies edged down to 102.36.

Asia

Chinese and Hong Kong markets were closed on Tuesday.

Japanese stocks ended higher, led by sharp gains in trading houses, as some signs of a cooling US economy raise hopes the Fed may slow the pace of tightening. Itochu Corp. surged 8.3% after it boosted its fiscal-year earnings guidance and announced a share buyback plan. The Nikkei Stock Average rose 3.0% to 26992.21. Investors are focusing on economic indicators and any developments on the war in Ukraine.

Europe

European stocks rallied in closing trade as risk appetite improves on market bets that central banks could tighten monetary policy less aggressively. The pan-European Stoxx Europe 600 rose 3.1%, the German DAX gained 3.8% and the French CAC 40 jumped 4.2%.

"Today has seen a significant upturn in risk sentiment, with global markets gaining traction to the detriment of the VIX [Cboe volatility index]," ING analyst Joshua Mahony wrote. With the Bank of England highlighting that central banks could reintroduce quantitative easing if needed and Australia's central bank lifting interest rates a "measly" 25 basis points overnight, there's a "feeling that economic weakness and elevated rates could soon see central banks take a less hawkish tone," he said.

In London, the FTSE 100 closed up 2.6% at 7086.46 points, with the pound continuing its upward trajectory as gilt markets continued to cool, easing investors' concerns, said Mahony. The U.K. index bounced back on gains made by retailers, financials and commodity companies. The top risers of the index were Flutter Entertainment PLC, Ocado Group PLC and Intermediate Capital Group PLC, closing up 9.3%, 8.9% and 8.4%, respectively.

North America

US stocks jumped again on Tuesday, extending a strong start to the fourth quarter and giving relief to investors after weeks of punishing losses.The Dow Jones Industrial Average advanced 2.8%, or more than 800 points, in afternoon trading. The S&P 500 surged 3.1%, and the technology-heavy Nasdaq Composite climbed 3.3%.

The gains built on Monday's rally, when the Dow posted its biggest one-day increase since June. Optimists hope that stocks might be poised for a broader recovery.

Major stock indexes fell in August and September as investors came to terms with stubbornly high inflation and the Federal Reserve's commitment to curb it by ratcheting up interest rates, even at the risk of tipping the economy into recession. Last week, the Dow joined the S&P 500 in entering a bear market, defined as a drop of 20% or more from a recent high.

Stocks got a boost Tuesday from a surprise decision by the Reserve Bank of Australia to raise interest rates less than expected. The move fueled hopes that other central banks worldwide might curb their plans to tighten monetary policy in response to signs of financial stress.

New data from the Labor Department showed that US job openings fell by 10% in August and layoffs rose slightly, signs that the labor market is starting to cool. While bad news for workers, such a slowdown could help reduce inflation and ease pressure on the Fed to keep lifting rates. On Monday, another closely watched report showed that growth in US manufacturing weakened to its lowest level in more than two years.

"If that trend continues, then the Fed will maybe start to pull off a little bit, in terms of the last few hikes that are priced into the market between now and early next year," said Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions.

Still, the S&P 500's downward trajectory this year has been punctuated by fleeting rallies -- which often faltered after Fed officials made clear that they were determined to keep pursuing aggressive rate increases. This time isn't necessarily any different, some investors warned.

"Bear markets don't go in straight lines and we are not done yet on the way down," said Hani Redha, a portfolio manager at PineBridge Investments.

Some of the headwinds facing the stock market have eased. Government-bond yields and the US dollar have retreated in recent days after both rose to multiyear highs. Oil prices have failed to recoup recent losses, easing concerns about inflation.

The dollar also weakened further. The WSJ Dollar Index -- which tracks the greenback against a basket of other currencies -- fell 0.8% on Tuesday, continuing its slide after hitting a 20-year high last month. The strong dollar has raised worries because it fuels inflation and financial distress in other countries, by raising the cost of their imports and weakening their currencies.

Tuesday's rally was broad-based, with fewer than 20 stocks in the S&P 500 in negative territory. Shares of cruise companies, airlines and casino operators were among the index's best performers.

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