Japan's benchmark Nikkei 225 jumped 1.8% to finish at 32,494.66. Sydney's S&P/ASX 200 inched up less than 0.1% to 7,091.00. South Korea's Kospi added 1.1% to 2,477.54. Hong Kong's Hang Seng surged 2.2% to 18,283.66, while the Shanghai Composite rose 0.9% to 3,106.21.
“Recent remarks from FOMC members have leaned dovish, suggesting that the Fed might maintain current short-term rates,” Anderson Alves at ActivTrades said in a report, referring to the U.S. Federal Reserve's action on interest rates.
Tensions in the Middle East are under the spotlight, with a possible escalation if nations like Lebanon or Iran are drawn in, which would set off significant movement in U.S. Treasuries, he said.
On Wall Street, the S&P 500 rose 0.4% to 4,376.95 for its fourth straight gain. The Dow Jones Industrial Average added 0.2% to 33,804.87, and the Nasdaq composite gained 0.7% to 13,659.68. All three indexes moved between small gains and losses through the day.
Wall Street has been mostly struggling since the summer as longer-term yields shoot higher in the bond market, weighing on prices for all kinds of investments. Some relief has come this week, and yields have eased after officials at the Federal Reserve suggested they may be done raising their main overnight interest rate.
The yield on the 10-year Treasury fell to 4.57% from 4.66% late Tuesday and from more than 4.80% last week, when it reached its highest level since 2007. Besides hurting prices for investments, high yields have jacked up rates for mortgages and other loans, which saps momentum from the economy.
The stock market got a boost from that drop in longer-term yields, but it also felt a drag from rising shorter-term yields. The two-year Treasury yield, which moves more closely with expectations for the Fed, ticked up to 4.99% from 4.97%.
Yields were mixed after a report showed inflation at the wholesale level was stronger last month than economists expected. A report showing how much inflation U.S. households are facing will arrive on Thursday, and economists expect it to show a slowdown.
While the report on wholesale inflation was above expectations, Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said it wasn’t enough to change her forecast that the Fed’s main interest rate is already at its peak.
“Fed officials are gradually taking comfort with the fact that the July rate hike may have been the last one in this historic tightening cycle,” said Gregory Daco, chief economist at EY.
Minutes from the Fed's meeting last month suggested officials see the outlook for the U.S. economy as particularly uncertain. They said they were ready to “proceed carefully” in deciding what to do next with rates.
Still, with the U.S. government racking up big deficits that require more borrowing, and buyers in shorter supply, the pressure has been mostly upward on Treasury yields.
In energy trading, a further pullback in crude oil prices is helping to take some heat off inflation and support Wall Street. Benchmark U.S. crude lost 27 cents to $83.23 a barrel in electronic trading on the New York Mercantile Exchange. It slumped $2.48 to settle at $83.49 on Wednesday. Brent crude, the international standard, fell 47 cents to $85.35 per barrel.
Oil prices have given back much of their strong gains from earlier this week, triggered by fighting in Gaza. Though the area doesn't produce much oil, the worry is that the violence could spill into the politics around the crude market and hurt the flow of petroleum.
Energy stocks in the S&P 500 logged the sharpest losses among the 11 sectors that make up the index.
Exxon Mobil felt extra pressure after it said it would buy Pioneer Natural Resources in an all-stock deal valued at $59.5 billion. Exxon Mobil fell 3.6%, and Pioneer Natural Resources rose 1.4%.
In currency trading, the U.S. dollar rose to 149.11 Japanese yen from 149.07 yen. The euro cost $1.0638, up from $1.0626.