Asian Stocks Dip Amid Fed Comments and Geopolitical Tensions

Asian stocks retreated from recent highs on Tuesday, with the dollar strengthening after Federal Reserve Chair Jerome Powell's comments dampened hopes for significant interest rate cuts. The Middle East tension added to the cautious mood. Investors are watching U.S. labor data for further clarity on rate cuts.

Asian stocks retreated from recent highs on Tuesday as Federal Reserve Chair Jerome Powell's comments dashed hopes for substantial interest rate cuts. The dollar strengthened in response, while geopolitical tensions in the Middle East kept investor sentiment cautious.

MSCI's index of Asia-Pacific shares outside Japan fell 0.32% to 618.87, below the two-and-a-half-year high of 627.66 reached on Monday. Japan's Nikkei rose nearly 2% on a softer yen, rebounding from a 4.8% drop on Monday following Shigeru Ishiba's victory in the prime ministerial contest.

European markets are poised for a higher open, with attention on euro zone inflation data, which may influence the European Central Bank's interest rate decisions. ECB President Christine Lagarde indicated growing confidence in hitting the 2% inflation target, suggesting a potential rate cut this month.

Chinese markets are closed this week, pausing the recent rally in Asian stocks. Economic stimulus measures have lifted Chinese stocks, with the blue chip CSI300 up 25% since last week. Investors are monitoring U.S. labor data for more insight into the pace of U.S. rate cuts.

Geopolitical tensions are also in focus after Israel's reported ground invasion of Lebanon. Investor attention is on the U.S. labor market, with key job openings and ISM manufacturing data expected this week. Despite geopolitical and economic uncertainties, oil prices remained stable, and gold traded near record highs.

(With inputs from agencies.)