On Tuesday, Asian stocks gained as investors displayed optimism that central banks in the region will continue to pause or end interest rate hike cycles, despite whatever action the U.S. Federal Reserve takes. 

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.6% as trading resumed after a long holiday weekend in many major Asian markets.

The central bank of South Korea kept interest rates steady for the second time consecutively on Tuesday morning, in line with market expectations. 

Asian economies are exercising caution when it comes to hiking interest rates, according to Gary Ng, a senior economist at Natixis Corporate and Investment Bank. He noted that these countries prioritise preserving growth over taming inflation, which is more of a concern in the US and Europe.

The Nikkei 225 index of Japan rose by 1% in early trading as the new governor of the Bank of Japan made his first public remarks on maintaining the central bank’s ultra-easy monetary policy, which was well received by the market.

The S&P/ASX 200 index in Australia increased by 1.4%, led by Newcrest’s shares surging up to 7.1% due to an improved takeover offer from Newmont. As a result, Newcrest became the top performer on the benchmark index.

In Hong Kong, the Hang Seng index rose by 0.9% due to gains in the tech sector. However, the Shanghai Composite index in mainland China fell by 0.35%, while the Shenzhen Component index increased by 0.2% after the nation’s inflation rate came in lower than anticipated at 0.7%.

Investor confidence in the central bank policies of the region has increased following the strong employment data from the United States, which was published last Friday, and sparked expectations that the Fed may raise rates in May. Nevertheless, Ng indicates that the 25 basis point increase currently priced in by the market is smaller than what had previously been predicted.

In other markets, the yield on benchmark U.S. Treasury 10-year notes fell by 1.5 basis points to 3.4%, while the dollar index edged down by 0.098% to 102.36, and the Japanese yen weakened 0.15% versus the dollar to 133.4.

In oil markets, U.S. crude gained 0.6% to $80.19 per barrel while Brent was at $84.65, also up 0.6%. Gold prices rose 0.32% to $1996.25 on Tuesday as the dollar weakened.

Looking ahead, domestic stocks will likely open higher on Tuesday, tracking positive cues from Asian peers. US stocks settled mixed overnight after an extended weekend, while traders in India are keenly awaiting key economic data releases and corporate earnings ahead. Nifty futures on the Singapore Exchange traded 0.15%, higher at 17,711.50, hinting at a positive start for the domestic market on Tuesday.