Asian Shares Seeing Highest Uptick in Five Months

On Dec 28, Asian shares reached five-month highs as market bets on ever-more aggressive rate cuts extended a massive rally in US stocks and bonds, but also left plenty of room for disappointment next year. The S&P 500 has risen 14% in just two months to within a whisker of its all-time closing high, while its price to earnings ratio has increased by a quarter year on year to 24.0.

MSCI's broadest index of Asia-Pacific shares outside Japan has gained 10% in two months and added 0.3% on Dec 28 to reach its highest level since August. The Nikkei 225 index in Japan fell 0.4% as the yen recovered, limiting its gains in December.

Chinese shares have generally missed out on the global cheer as foreign investors shun the country, worried about economy's faltering recovery and tensions with the United States. Blue chips were up 0.5 per cent on Thursday, but are down 4 per cent for December so far.

The EUROSTOXX 50 futures rose 0.3%, while the FTSE futures rose 0.2%. S&P 500 futures rose 0.1 percent to a new high, while Nasdaq futures rose 0.2 percent.

Despite a lack of major news, investors are increasing their bets on the Federal Reserve cutting interest rates quickly. Futures now indicate an 88% chance of a rate cut as early as March, a significant increase from a month ago when the probability was only 21%. The market expects 157 basis points of easing in 2024, with rates reaching 3.00-3.25 percent by 2025.