Asian stock markets rose slightly on Tuesday, supported by growing expectations of a Federal Reserve interest rate cut.
However, Japanese shares fell due to a stronger yen and losses in the technology sector, while markets in China and South Korea remained closed due to public holidays.
Investors are betting on a 50-basis point interest rate cut by the Federal Reserve, which is expected to be announced after its two-day meeting on Wednesday. This anticipation has boosted Asian markets, with Australia’s ASX 200 up 0.3% and Hong Kong’s Hang Seng index rising 0.9%.
Meanwhile, U.S. stock index futures were flat in Asian trade after a mixed session on Wall Street. The Dow Jones Industrial Average reached a record high as bets on lower interest rates spurred flows into economically sensitive sectors, while tech stock losses dragged the NASDAQ Composite lower.
Japanese markets, however, struggled as the Nikkei 225 and TOPIX indexes fell 1.7% and 1.4%, respectively, following a long weekend.
The strength of the yen, which reached its highest level in over a year on Monday, put pressure on export-oriented sectors.
The yen was buoyed by expectations that the Bank of Japan (BOJ) might adopt a more hawkish stance during its meeting later this week. Although the BOJ is expected to keep interest rates unchanged, several members have indicated that rate hikes could come in the future, especially in light of rising inflation.
Tech stocks also weighed on Japanese markets, with major chipmakers following the downward trend seen in their U.S. counterparts.
Despite Japan’s declines, investors in India remained optimistic, with futures for the Nifty 50 index pointing to a flat open and the index nearing a record high. Indian inflation data, due later this week, is also in focus.
With the Federal Reserve expected to initiate an easing cycle, lower interest rates are likely to boost liquidity and spur investments into riskier assets like stocks. Markets are currently pricing in at least 100 basis points of rate cuts this year.