Asian stocks are higher on rate cut bets; Japan falls on yen strength by Investing.com

Investing.com– Most Asian shares were up slightly on Tuesday on expectations of an interest rate cut by the Federal Reserve, while Japanese markets were hit by a stronger yen ahead of a Bank of Japan meeting.

Regional markets picked up averages from a mixed overnight session on Wall Street, where losses in tech stocks eased. But it hit a record high as bets on lower interest rates drove some flows into economically sensitive sectors.

US stock index futures were flat in Asian trade. Regional trading volumes were reduced due to holidays in China and South Korea.

Asian markets were buoyed by the prospect of a 50 bps Fed rate cut

Asian stocks advanced on growing bets that the Fed will hike 50 basis points at the end of a two-day meeting on Wednesday.

Traders were seen pricing in a 68% chance of a 50bps discount and a 32% chance of a 25bps discount.

Australia added 0.3 percent, while Hong Kong’s index rose 0.9 percent, recovering from steep losses in the previous session after a series of weak economic data from China.

Sentiment toward China was also hurt by the prospect of a renewed trade war with the West.

Futures for India’s index indicated a flat open, with the index remaining in sight of a record high. India’s inflation readings are available this week.

The Fed is expected to begin an easing cycle from Wednesday’s meeting, with lower rates presenting a more positive outlook for stock markets. Markets are pricing in at least 100 bps of rate cuts this year.

Lower rates free up more liquidity for investment in risk-based assets, which typically causes flows into equity markets.

Japanese stocks fall on yen strength and tech losses

Japan and indexes fell 1.7 percent and 1.4 percent respectively as they resumed trading after a long weekend.

Local markets were pressured by the strength of the yen, which hit its strongest level in more than a year on Monday. Export-oriented sectors were particularly pressured by a .

The Japanese currency was supported by expectations that the BOJ would strike an unchanged chord then, although the central bank is still expected to keep interest rates unchanged.

But several BOJ members have signaled that Japanese interest rates will rise in the coming months, especially in the face of higher inflation. Japan’s consumer inflation data is due on Friday.

Losses in tech stocks also weighed on Japanese markets, with major chipmakers falling in tandem with Wall Street.