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The optimism was fuelled by a successful auction of 20-year US Treasuries, which led to a fall in other bond yields and sparked speculation that the Federal Reserve could cut borrowing costs as early as March.

The positive sentiment in Asia was particularly evident in Hong Kong, where the Hang Seng Index surged by more than 1.5 per cent. Mainland Chinese stocks also rose, with the Shanghai Composite Index gaining 0.6 per cent. Other regional markets such as Sydney, Seoul, Taipei and Manila also rose.

The improved monetary policy outlook has been the main driver of the recent rally in risk assets, as investors are less concerned about the prospect of further interest rate hikes. This has led to a weakening of the US dollar in favour of Asia’s export-oriented economies.

Asian investors built on a stock market rally on Wall Street, fuelled by easing expectations of a Federal Reserve rate hike

However, despite the growing optimism, some analysts warned that the Fed’s work to curb inflation is far from over. Thomas Barkin, president of the Richmond Fed, recently emphasised that the central bank still has “a lot of work to do” to bring inflation down to its target level.

Traders will be watching the minutes of the Fed’s November policy meeting, due later this week, for further clues about the central bank’s intentions. They will also be watching for comments from Fed officials in December before the Fed’s final meeting of the year.

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