Asian stock markets rose on Tuesday, reflecting the strength of Wall Street the day before. This strength is attributed to the growing expectations of a rate cut by the U.S. Federal Reserve (Fed) in September, following last week's weaker-than-expected August employment data. Investors are increasingly betting on the possibility of a larger 50 basis point reduction. Asian markets advanced despite global political turmoil, keeping currency and bond investors on alert.

At the time of writing, the Japanese Nikkei 225 is retreating from its historic highs, trading around 43,700, while the Hong Kong Hang Seng remains above 25,800, reducing its daily gains after reaching highs since October 2021. The South Korean KOSPI is up 1.07% above 3,250, its highest level in over five weeks. However, the Chinese Shanghai Composite is down 0.30% to nearly 3,800, while the Shenzhen Component depreciates by 0.89% to 12,500.

Traders are considering a 25 basis point cut this month as virtually certain, with attention now turning to the possibility that the Federal Reserve opts for a larger cut of 50 basis points. The CME FedWatch tool shows that markets are pricing in nearly a 90% probability of a quarter-point cut at the September meeting, up from 86% a week earlier, with a 10% probability of a 50 basis point cut.

Operators will likely monitor the upcoming revision of U.S. non-farm payrolls scheduled for later in the day. Attention will then turn to U.S. inflation reports that could influence interest rate outlooks. The U.S. Producer Price Index (PPI) for August is expected on Wednesday, followed by the Consumer Price Index (CPI) on Thursday.

Japanese stocks hit new records following the resignation of Prime Minister Shigeru Ishiba. Ishiba announced on Sunday that he would resign due to growing divisions within the ruling party and sustained pressure following his defeat in last year's national elections. In a separate development, Japanese trade negotiator Ryosei Akazawa stated in a post on X on Tuesday that American tariffs on Japanese products, including cars and auto parts, will be reduced by September 16.

Hong Kong stocks advanced, led by a jump of around 2% in property stocks after Shenzhen eased home purchase restrictions last week. Technology, financial, and consumer stocks also rose, supported by a third consecutive increase in mainland markets as Beijing moves towards a record trade surplus.

South Korean markets found support after Finance Minister Koo Yun-cheol signaled on Monday that the government might reconsider its earlier proposal on capital gains taxation for large shareholders. The initial plan aimed to lower the taxable stock holding threshold from 5 billion KRW (3.61 million dollars) to 1 billion KRW.