In This Article:
* Asian stock markets : https://tmsnrt.rs/2zpUAr4
* Nikkei climbs 1.5% on hopes for dovish Fed
* Global bonds yields dive after Draghi flags stimulus
* Trump says to meet Xi at G20, trade talks to resume
* Gold, oil lead commodities higher on reflation trade
By Wayne Cole
SYDNEY, June 19 (Reuters) - Asian share markets jumped on Wednesday as investors dared to hope the Federal Reserve would follow the lead of the European Central Bank and open the door to future rate cuts at its policy meeting later in the day.
Indeed, ECB President Mario Draghi's shock turnaround on easing fuelled talk of a worldwide wave of central bank stimulus, firing up stocks, bonds and commodities.
Adding to the cheer was news U.S. President Donald Trump would meet with Chinese President Xi Jinping at the G20 summit later this month, and that trade talks would restart after a recent lull.
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.6% in early trade, adding to a 1% gain the day before.
Japan's Nikkei rose 1.5% and South Korea 1.1%. E-Mini futures for the S&P 500 were a fraction firmer after a upbeat Wall Street session.
The Dow ended Tuesday with gains of 1.35%, while the S&P 500 rose 0.97% and the Nasdaq 1.39%. The S&P 500 has gained 6% so far this month to be 1% from the all-time high hit in early May.
All eyes are now upon the Fed which is scheduled to release a statement at 1800 GMT on Wednesday, followed by a press conference by Chairman Jerome Powell shortly after.
Yet the heightened anticipation also creates risks the Fed might fail to meet investors' high expectations.
"Market expectations for a dovish shift are nearly universal, the only question seems to be the degree," said Blake Gwinn, head of front-end rates at NatWest Markets.
Futures are almost fully priced for a quarter-point easing in July and imply more than 60 basis points of cuts by Christmas. "Markets will be looking for validation of this pricing," he added. "We think this represents a fairly high bar for the Fed to deliver a dovish surprise."
SUB-ZERO YIELDS
BofA Merrill Lynch's latest fund manager survey spoke volumes about the sea change in sentiment.
Allocation to global equities dropped 32 points to a net 21% underweight, the lowest since March 2009, while the bond allocation hit the highest since September 2011.
Interest rate expectations collapsed, while concerns about a trade war soared to be the top risk for investors, ahead of monetary policy impotence, U.S. politics and a slower China.