MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.2%, after U.S. stocks ended the prior session with gains

Asian stocks rose on Tuesday after a tech-led rally on Wall Street as investors look to the next set of U.S inflation figures due this week, which could provide further clarity on when the Federal Reserve might start cutting interest rates.

MSCI’s broadest index of Asia-Pacific shares outside Japan inched up 0.2%, after U.S. stocks ended the prior session with gains.

Trading in Europe was also set for a positive turn, with the pan-region Euro Stoxx 50 futures 0.29% higher, German DAX futures up 0.27% and FTSE futures 0.34% higher.

U.S. stock futures, the S&P 500 e-minis, were down 0.1%.

Australian shares were 0.95% higher, while Japan’s Nikkei stock index was trading 1.14% higher. In Australia, the S&P/ASX200 rose after November retail sales posted the biggest monthly gain in two years.

Hong Kong’s Hang Seng Index was 0.26% higher while China’s bluechip CSI300 Index added 0.21% after earlier trading in negative territory.

The positive sentiment across the region’s equities markets comes ahead of December’s U.S Consumer Price Index (CPI) figures due to be published on Thursday.

It is expected to show headline inflation increased 0.2% in the month and by 3.2% on an annual basis.

Overnight, the New York Fed’s latest Survey of Consumer Expectations showed that U.S. consumers’ projection of inflation over the short run dropped to the lowest level in almost three years in December.

That reinforced bets for Fed cuts to start soon, though some analysts say the market pricing of monetary easing is overdone.

The market is now looking for five U.S. rate cuts in 2024, which we think is too aggressive. We are looking to three, not five, said Marcella Chow, JPMorgan Asset Management’s global market strategist in Hong Kong.

Inflation has not returned to the target just yet and the Federal Reserve should not be in too much of a rush to cut. Consumer Price Index can be quite sticky and stubborn, we expect them to start cutting rates from June, Chow said.

China is due to publish December Consumer Price Index figures on Friday which analysts expect will show further deflation amid persistent weakness in the economy. China’s stock market was among the worst performers globally in 2023, with the CSI300 index ending the year with 11% losses, against a 20% gain for global stocks.

Investors’ conviction and confidence is driving the Chinese market now because on the fundamentals side in terms of earnings and revenue performance it’s okay, said Zhikai Chen, BNP Paribas Asset Management’s head of Asian equities.

But investors are just not willing to buy China or China linked firms even though the valuations have gone down so much, Chen said.

The Dow Jones Industrial Average gained 0.58% on Monday, the S&P500 added 1.41%, and the Nasdaq jumped 2.2% after a strong surge in U.S tech stocks.

In Asian trading, the yield on benchmark 10-year Treasury notes gained to 4.0114% compared with its U.S. close of 4.002% on Monday.

The two-year yield, which rises with traders’ expectations of higher Fed fund rates, hit 4.3704% compared with a U.S. close of 4.345%.