Asian markets bounce higher on rate hikes

Asian stocks bounce higher on signs rate hikes are working People pass by an electronic screen showing Japan's Nikkei share price index inside a commercial building in Tokyo.

On Wednesday, Asian stocks went up as investors grew hopeful that future global interest rate rises might become less aggressive due to early signs that previous policy tightening was working to temper price pressures in some major world economies.

After U.S. stocks ended the previous session with gains, the broadest index of Asia-Pacific shares outside Japan was up 0.5%. The index is down 0.6% so far this month.

Australian shares rose by 1.35% in early trade, while Japan's Nikkei stock index went up 0.34%.

Hong Kong's Hang Seng Index gained 3.76% a day after its public holiday while mainland Chinese markets are closed for holidays.

The Australian shares' strong start is the first two-day gain since Sept. 13 and follows the sharemarket's best day in more than two years on Tuesday after the Reserve Bank of Australia ordered a smaller than expected 25 basis points interest rate rise.

On Wall Street, the Dow Jones and S&P 500 indexes staged their biggest two-day rallies in two years, as fears of aggressive rate hikes eased.

The positive sentiment was fuelled after U.S. job openings fell by the most in nearly 2 -- 1 2 years in August, a sign that the Federal Reserve'sFederal Reserve's mission to tame demand was working.

Markets have clawed back more of the ground they lost in a slippery few weeks on Wall Street, amid hopes that the Federal ReserveFederal Reserve will moderate its aggressive approach to its plans for interest rate increases after data released showing a drop in job openings in the country, Ord Minnett research analyst wrote in a client note on Wednesday.

New Zealand raised its rates 50 basis points on Wednesday, as expected, but said it had considered a 75 basis point increase, as a sign that central banks are still anxious about inflation.

The Dow Jones Industrial Average rose 2.8%, the S&P 500 increased 3.06% and the Nasdaq Composite rose 3.34%.

According to Macquarie analysts, the S&P 500 has had its third best start to October since 1930.

Global financial markets have a rebound that is boosted by expectations that central banks may follow the RBA's lead and relax the pace at which they tighten monetary policy, ANZ analysts said.

The markets are mixed as to whether markets have now bottomed out or whether this recovery will be short-lived. The yield on benchmark 10 year Treasury notes rose to 3.625% compared to its U.S. close of 3.617% on Tuesday.

The two-year yield, which has gone up with traders' expectations of higher Fed fund rates, has risen to 4.0905%, compared to a U.S. close of 4.097%.

The dollar dropped to 143.79, down 0.21% against the yen. The euro fell by 0.1% on the day to $0.9974, having gained 1.79% in a month, while the dollar index, which tracks the dollar against a basket of currencies, fell nearly 4% since Sept. 26.

The USD's significant move lower since making a new 20 plus year high last Wednesday is an entirely logical response to the combination of a lower US bond yield and a much improved risk sentiment, according to NAB analysts on Wednesday.

U.S. crude fell 0.15% to $86.39 a barrel. Brent crude fell to $91.80 per barrel.