Asia stocks gain amid Fed easing bets; Nikkei struggles over BOJ hike prospects

Investing.com-- Most Asian stock markets edged higher on Tuesday, lifted by growing expectations of a Federal Reserve rate cut next week, while Japanese stocks struggled amid signals the Bank of Japan may raise interest rates.

Gains were also limited as markets also took cues from a weak finish on Wall Street overnight. U.S. stock index futures were largely muted in Asia hours on Tuesday.

Fed cut bets gain steam

Investors have been increasingly pricing in a December Fed rate cut, citing softer U.S. economic data and easing inflation pressures.

Amongst the latest data, U.S. factory activity weakened further in November, with the ISM manufacturing PMI falling to 48.2 from 48.7 in October, missing market expectations of 49.0.

A potential easing of policy by the Fed has bolstered risk appetite across the region, with traders expecting a weaker dollar to support equities and commodities alike.

South Korea’s KOSPI jumped 1.5%, outperforming its regional peers after the U.S. confirmed that the general tariff rate on imports from South Korea, including autos, would drop to 15% retroactive to November 1.

The move was seen as a boost for export-driven South Korean firms, lifting sentiment and helping push the index higher.

Elsewhere, Australia’s S&P/ASX 200 ticked up 0.1%, while Singapore’s Straits Times Index gained 0.2%.

Bucking the trend, China’s blue chip Shanghai Shenzhen CSI 300 and the Shanghai Composite index fell 0.6% each. Hong Kong’s HSI traded flat.

India’s Nifty 50 opened largely muted on Tuesday.

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Nikkei under pressure amid BOJ hike prospects

Japan’s Nikkei 225 edged up 0.2% after slumping nearly 2% on Monday following hawkish signals from the BOJ.

Officials have flagged concerns over yen depreciation and potential inflation pressures, raising expectations of a near-term rate increase. Investors reacted cautiously, as higher Japanese interest rates could weigh on equities and limit the impact of global monetary easing.

BOJ Governor Ueda signaled a possible December rate hike, saying it would slightly adjust easing while keeping monetary conditions accommodative, with the bank carefully weighing the move’s pros and cons.

His hawkish comments pushed the yen higher, which weighed on Japan’s export-heavy stock market.