Most Asian markets rose on Tuesday, recovering from the previous day’s sell-off. Investors are closely watching the release of US inflation data, which could influence the Federal Reserve’s decisions on interest rates. Despite a relatively subdued performance on Wall Street, there is caution in the markets as investors consider potential profit-taking and assess the outlook for monetary policy.

There is a sense of nervousness on trading floors ahead of the release of the February consumer price index (CPI) report later in the day. The unexpected uptick in January dampened hopes for an earlier start to rate cuts by the central bank. Futures traders are now betting on three rate reductions this year, compared to the initial forecast of six at the beginning of the year.

Stephen Innes of SPI Asset Management emphasizes the importance of avoiding a repeat of the last CPI release. Another report similar to January’s could raise doubts about the wisdom of the Fed’s rate-cutting approach in 2024, potentially impacting risk appetite.

In early trading, Hong Kong continued its recent advance, benefiting from increased buying of tech firms and positive Chinese inflation data over the weekend, calming concerns about the country’s economy. Sydney, Seoul, Singapore, Taipei, and Manila also experienced gains.

However, Tokyo saw declines amid speculation that the Bank of Japan might shift away from its ultra-loose monetary policy next week, impacting the strength of the yen. Shanghai and Wellington also recorded falls.

Investors largely disregarded Wall Street’s negative performance, where equities reached multiple record highs this year. Analysts suggest that stocks may be due for consolidation or even modest declines, particularly if there is no significant shift in the fundamental picture. Such a downturn could be viewed as a buying opportunity.

The expectation of lower US interest rates has played a role in driving bitcoin to new record highs, reaching $72,880. Regulatory developments in the US and the UK, allowing exchange-traded funds (ETFs) for bitcoin, have further supported its rise and expanded its appeal to new classes of investors.