World shares, bonds rally as markets count on patient Fed

Asian shares scaled a two-year top on Thursday as investors wagered policy tightening in the United States would be glacial at best, lifting Wall Street to record peaks and lowering bond yields almost everywhere.

The star performer was the Canadian dollar, which rocketed to 11-month highs after the country's central bank hiked rates for the first time in seven years and left the door wide open to further moves. 

Yet the overall mood was one of relief that Federal Reserve Chair Janet Yellen had not sounded more hawkish in her appearance before Congress, a green light for risk taking. 

Sentiment got another boost when China reported upbeat data on exports and imports for June, helping the blue-chip CSI300 index .CSI300 up 0.4 percent. 

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1.2 percent to its highest since May 2015. 

Australia's main index jumped 1 percent, while South Korea .KS11 rose 1.1 percent to a record after its central bank kept policy easy to support consumer spending. 

Japan's Nikkei .N225 was restrained by a firmer yen and managed only a 0.15 percent gain. 

On Wall Street, the Dow .DJI rose 0.57 percent, while the S&P 500 .SPX gained 0.73 percent and the Nasdaq .IXIC 1.10 percent. The rate-sensitive S&P 500 real estate index .SPLRCR jumped 1.3 percent, its biggest gain in about four months. 

Equities were underpinned by a drop in bond yields as Yellen sounded cautious on inflation and noted the Fed would not need to raise rates "all that much further" to reach current low estimates of the neutral funds rate.

Indeed, markets doubt even that modest tightening will ensue and imply only a 50-50 chance of a rise by December.