Shares, bonds rally as markets await signals for Fed rates

Japanese government bond yields dropped to historic lows on Thursday, mirroring a climb in U.S. Treasury securities after a break in tensions between the U.S. and Iran. The yen strengthened against the dollar, with the currency gaining 0.07 percent to 158.59 per dollar. MSCI's Asia-Pacific shares outside Japan rallied 0.5 percent, following a modest increase in U.S. stocks the previous day.

The euro also edged up, while oil prices edged lower amid uncertainty surrounding potential military strikes. Investors are eagerly awaiting Friday's U.S. payrolls report, a key economic indicator that could provide clarity on the Federal Reserve's rate decision. Fed Governor Christopher Waller is scheduled to speak after New York Fed President John Williams signaled that a rate hike this month is not yet imminent.

Despite the positive market sentiment, the Middle East situation remains a concern, with the region experiencing some of its largest attacks in months.