Asian stocks climbed following a strong session on Wall Street on Tuesday, fueled by expectations that the Federal Reserve will soon indicate its readiness to begin reducing interest rates.

Stocks gained in Japan, South Korea, and Australia. The MSCI Asia-Pacific index was on track for a third consecutive day of increases, while Hong Kong futures also indicated a rise. The upturn was powered by positive sentiment in the US, where the S&P 500 rose for an eighth consecutive day, marking the longest winning streak this year.

In Asia, attention will focus on China’s loan prime rate and the Reserve Bank of Australia’s August policy meeting minutes. Traders will also monitor whether the yen continues to strengthen against the dollar before Bank of Japan Governor Kazuo Ueda’s appearance in parliament on Friday, where he’s expected to provide insight into the policy outlook.

Despite recent volatility and increased uncertainty about the economy, investors’ interest in equities remains strong during the challenging period in July and August. Treasury 10-year yields remained relatively stable, while a dollar measure was set for a third consecutive day of declines.

As the Fed approaches a critical juncture, financial markets will seek confirmation from Jerome Powell on Friday that the US central bank will decrease rates in September. However, there is significant uncertainty regarding what happens after that and the pace of additional cuts over the next several months as the Fed deals with inflation and employment risks.

According to Ohsung Kwon at Bank of America Corp, US policymakers are not likely to be more dovish than the market, but as long as growth is “OK,” equities can weather a less-dovish central bank.

Kwon stated that stocks require an assurance that growth will be supported. He also mentioned that while they believe there is upside risk, they do not expect the Jackson Hole event to cause significant movements in the equity market as it did when the Fed used the forum to signal upcoming policy decisions.

Stock trading volume has decreased since the surge during the early-August selloff, as traders are hesitant to make significant bets before the Fed’s Jackson Hole economic symposium this week. On Monday, about 10 billion shares were traded, 14% below the one-month average. S&P 500 futures showed minimal change early on Tuesday.

Deutsche Bank AG strategists Parag Thatte and Binky Chadha noted that equity positioning has returned to moderately overweight a week after dropping to underweight. They noted that exposure levels remain well below the highs seen in mid-July, at the top of the historical range.

Regarding commodities, oil prices declined as the US announced that Israel had accepted a cease-fire proposal to end the conflict in Gaza. This could potentially ease supply risks when concerns about the demand outlook are climbing.

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