Asian stocks rise on optimism ahead of central bank rate decisions

A key focus for traders was US inflation data, due today

Asian stock markets were buoyed on Tuesday by overnight optimism on Wall Street that the US Federal Reserve and other central banks would ease off on the pace at which interest rates have been hiked to tackle the highest inflation levels in decades.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.17 per cent while Japan's Nikkei and Seoul's KOSPI index were 0.32 per cent and 0.01 per cent higher respectively. Australian shares rose 0.34 per cent.

A key focus for traders was US inflation data due out at 1330 GMT on Tuesday, with core CPI expected to slow from 6.3 per cent to 6.1 per cent and headline inflation dropping to 7.3 per cent. Treasury Secretary Janet Yellen struck a cautious note on Sunday in saying she expected a substantial slowdown in 2023 inflation, but that the US economy remained prone to shocks.

Later this week, the Fed, European Central Bank and the Bank of England are all expected to raise rates by 50 basis points (bps), rather than the aggressive 75 bps hikes they approved earlier in the year.

"Given the very close proximity (of US CPI data) to the FOMC, it clearly has the ability to change the tone of the message ... but is highly unlikely to change the headline 50 bps hike," Deutsche Bank said in a research note.

Chinese stocks were expected to be flat on Tuesday as a rapid Covid-19 surge in the world's biggest economy is raising worries that infections might disrupt consumption and manufacturing.

The dollar was firm, rising 0.8 per cent versus the yen overnight and steady at 137.62 yen in early Asia trade on Tuesday. It also held onto gains on the Australian dollar at $0.6756.

Oil prices were higher after jumping on Monday due to supply jitters, with Brent crude futures up 0.28 per cent at $78.21 a barrel and US West Texas Intermediate crude up 0.51 per cent at $73.54 a barrel.

Spot gold was steady at $1,781.66 per ounce, while US gold futures were up 0.1 per cent at $1,793.40.