Australian shares finished at an 18-week high on Thursday, after signs the US Federal Reserve was preparing to cut rates next year sparked a wave of risk-on trading across global markets.

The S&P/ASX 200 Index jumped 120.1 points, or 1.7 per cent, to 7373 – the gauge’s best one-day return of the year. The All Ordinaries was also 1.7 per cent higher.

All 11 sectors ended the day in the green. The rate-sensitive real estate sector was the standout performer, jumping 4 per cent.

The ASX rally followed on from a strong overnight session on US indexes, after the Fed kept rates on hold and improved its 2024 forecast. The central bank’s median dot-plot projection, updated alongside the rate decision, forecast a policy rate of 4.6 per cent by end-2024 down from the 5.1 per cent projected at the September.

GSFM investment strategist Stephen Miller said the US central bank had sent a clear signal that rate hikes were at an end and that there was a strong likelihood of rate cuts next year.

“The ‘pivot’ unleashed a strong rally in bonds and equities as markets rushed to embrace a ‘soft landing’/ ‘immaculate disinflation’ scenario,” he said in a note to investors.

Mr Miller added that the rally ensued despite chairman Jerome Powell saying the central bank wasn’t ready to take further rate increases off the table.

“Powell’s circumspection may reflect some lingering, but clearly diminished, anxieties surrounding the pace at which inflation is falling,” Mr Miller said.

Back on the ASX, materials stocks rallied, boosted by gold miners, after the precious metal pushed back above $US2000 overnight.

The risk-on trading also boosted lithium miners, which have been trending down for much of the year: IGO added 11.3 per cent to $8.37, Core Lithium gained 8.2 per cent to 27¢ and Pilbara Minerals rallied 8.6 per cent to $3.79.

Meanwhile, insurers, which benefit from a rising interest rate environment, fell: QBE dropped 2.6 per cent to $14.07, IAG fell 1.9 per cent to $5.60 and Suncorp dipped 1.6 per cent to $13.61.

In corporate news, Genesis Minerals added 5.1 per cent to $1.75 after striking a deal to buy the Bruno-Lewis and Raeside gold projects from Kin Mining.

Viva Energy jumped 6.1 per cent to $3.32 after Australia’s competition watchdog said it would not oppose plans by the petrol retailer to acquire Peregrine Corporation’s OTR Group.

The board of New Zealand-based Volpara Health Technologies has backed a buyout offer from AI cancer detection developer Lunit. The shares jumped 41.3 per cent to $1.10.

Orora dropped 3 per cent to $2.60 after the bottle maker flagged earnings headwinds that could hurt the outlook for its recently purchased Saverglass business.

And Sydney start-up Pendula has offered to buy takeover target Whispir for 57¢ per share, a 19 per cent premium on the price offered by private equity-backed Soprano Design. Whispir added 1.9 per cent to 53¢.