Asian equities poised for weekly gain as US rate hike bets fade

Asian stocks were set to close the week higher on Friday as waning expectations for a U.S. interest rate hike supported risk appetite in regional equities.

Traders cited reduced wagers on a Federal Reserve rate increase following softer U.S. economic data, which tempered concerns over aggressive monetary tightening. The MSCI Asia ex-Japan index was up 0.4% in late trading, tracking gains in major regional benchmarks.

Japan’s Nikkei 225 rose 0.5%, while South Korea’s Kospi advanced 0.3%. Australia’s S&P/ASX 200 gained 0.2%, reflecting broad-based buying interest. The gains extended a weekly advance, with the MSCI Asia ex-Japan index on track for its first weekly rise in three weeks.

The shift in sentiment followed data showing a slowdown in U.S. job growth and a moderation in service-sector activity, which reduced the likelihood of a near-term rate hike. Atlanta Fed President Raphael Bostic said on Thursday that the central bank could afford to wait before raising rates again, reinforcing expectations for a pause.

Investors remained cautious ahead of Friday’s U.S. nonfarm payrolls report, which is expected to show a modest increase in hiring. The jobs data, along with wage growth figures, could further influence Fed policy expectations and market direction.

The dollar index slipped 0.1% against major peers, while U.S. Treasury yields edged lower, easing pressure on regional equities. Analysts noted that a sustained pause in rate hikes would support corporate earnings and equity valuations in Asia.

The outlook for Asian markets remains tied to global monetary policy, particularly the Fed’s next moves. Any signs of prolonged tightness could weigh on regional growth and investor sentiment.

For the week, the MSCI Asia ex-Japan index was up 0.8%, erasing losses from the prior two weeks. The rebound underscored the sensitivity of regional equities to shifts in U.S. rate expectations.