Japanese shares surged to fresh 34-year highs as the Bank of Japan stood pat on ultra-loose monetary policy, while Chinese stocks struggled as speculation of a huge rescue package from Beijing underwhelmed investors worried about the shaky economy.
European markets are likely to open mostly flat, with
EUROSTOXX 50 futures up 0.1 per cent. S&P 500 futures were flat although
Nasdaq futures gained 0.1 per cent.
The Nikkei's early gains were later erased by profit-taking
but the index is still up 9 per cent so far this year.
The MSCI's broadest index of Asia-Pacific shares outside
Japan rose 0.9 per cent, boosted by a 2.9 per cent surge in Hong Kong's Hang
Seng index.
China's cabinet pledged late on Monday to take more forceful
and effective measures to support market confidence. Further lifting sentiment
was a Bloomberg News report that policymakers were seeking to mobilize about 2
trillion yuan ($278 billion) to stabilise the country's slumping stock markets.
The world's second-biggest economy faces numerous challenges
including a deepening housing crisis and sluggish demand that is fuelling
deflationary pressures - factors that have weighed on the stock market in
recent weeks.
Chinese blue-chips wavered between gains and losses, and
were last up a modest 0.2 per cent, not far off from five-year lows hit just on
Monday.
"Reports of the rescue package has seen an evergreen
question resurface: will it be enough to turn the ship around? And early market
reactions suggest traders are underwhelmed," said Matt Simpson, senior
market analyst at City Index.
"The National Team have likely been supporting the
market already, and whilst that may have deterred bears it hasn't really
enticed bulls from the sideline."
The Bank of Japan on Tuesday kept ultra-low interest rates
intact in a widely expected move. It cut its near-term inflation outlook but
revised up its forecast for fiscal 2025 to 1.8 per cent from 1.7 per cent.
Governor Kazuo Ueda will hold a press conference later in
the day (0630 GMT). Traders are focusing on any clues on how soon the BOJ will
pull short-term rates out of negative territory, which is seen as the next move
Ueda will take in dismantling his predecessor's radical stimulus programme.
The yen found its footing and steadied at 148.01 per dollar,
after dipping 0.3 per cent in a knee jerk reaction to the BOJ statement.
Ray Attrill, head of FX research at National Australia Bank,
said the revised inflation forecast for 2025 suggested the BOJ was moving
closer to its target of achieving a 2 per cent inflation rate.
"For our mind, April is the absolute earliest that they
will contemplate a tightening... We actually think the risk is that they end up
moving later rather than sooner than April."
Yields on Japanese government bonds eased 1 basis point to
0.64 per cent, way down from a peak of 0.97 per cent in November.
Most Asian share markets were up, tracking the overnight
rally on Wall Street which sent the benchmark S&P 500 to another record
high amid little market-moving data and events.
Investors are waiting for earnings from Netflix after the
close and expectations are generally upbeat. Also due is GE, with JPMorgan
looking for earnings to beat the Street's forecasts.
Traders have pared back their expectations for the timing of
the first interest rate cut from the Federal Reserve, with the probability for
March at just 40 per cent now. However, they still see about five rate cuts
this year.
The European Central Bank (ECB) meets on Thursday and is
expected to hold monetary policy steady.
In the currency markets, the Australian dollar and the kiwi
dollar - liquid proxies for China's yuan - each gained 0.5 per cent thanks to
the talk about stock market support measures from Beijing.
U.S. Treasury yields were steady after dipping overnight as
investors took advantage of a decline in bond prices to enter the market. The
10-year were little changed at 4.0957 per cent, while the two-year yield held
at 4.3825 per cent.
Oil prices were mostly steady on Tuesday after surging 2 per
cent overnight as a Ukrainian drone strike on Russia's Novatek fuel terminal
caused supply disruptions.
U.S. crude futures were flat at $74.73 per barrel after
climbing 2.4 per cent overnight to a one-month top of $75.75 and Brent futures
slipped 0.1 per cent to $80.00.
Spot gold was 0.4 per cent higher at $2,027.95 an ounce.