Most Asian stock markets moved higher on Tuesday, supported by rising expectations of a Federal Reserve rate cut next week. Japanese equities, however, lagged behind as signals from the Bank of Japan pointed to a potential interest rate increase.
Regional gains were capped by a weak close on Wall Street overnight. U.S. index futures traded mostly flat during Asian hours on Tuesday.
Fed rate-cut expectations strengthen
Investors have continued to price in a possible Fed rate cut in December, driven by softening U.S. economic indicators and easing inflation pressures.
Recent data showed U.S. manufacturing activity weakening further in November. The ISM manufacturing PMI slipped to 48.2 from October’s 48.7, falling short of expectations for a 49.0 reading.
The prospect of looser Fed policy has encouraged risk-taking across Asian markets, with traders anticipating that a softer U.S. dollar will offer additional support to equities and commodities.
South Korea’s KOSPI rose 1.5%, outperforming regional indices after the U.S. confirmed that the general tariff rate on South Korean imports — including automobiles — would fall to 15%, retroactive to November 1. The development was viewed as a positive for South Korea’s export-driven industries.
Australia’s S&P/ASX 200 gained 0.1%, while Singapore’s Straits Times Index added 0.2%.
China’s markets diverged, with the Shanghai Shenzhen CSI 300 and the Shanghai Composite each declining 0.6%. Hong Kong’s Hang Seng Index traded flat, while India’s Nifty 50 opened little changed.
Nikkei under pressure as BOJ signals possible rate hike
Japan’s Nikkei 225 inched up 0.2% after losing nearly 2% on Monday following more hawkish commentary from the Bank of Japan.
BOJ officials have highlighted concerns about yen weakness and renewed inflation pressures, raising expectations of a near-term interest rate hike. Investors reacted cautiously, as higher Japanese rates could weigh on domestic equities and offset support from global monetary easing.
Governor Kazuo Ueda suggested the BOJ may consider a rate increase in December, stating that any adjustment would maintain accommodative conditions while the bank closely evaluates the impact. His comments strengthened the yen and added pressure to Japan’s export-focused stock market.
