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Asia Markets Prepare for Bank of Japan Decision with Potential Mixed Results

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“As investors brace for the Bank of Japan’s decision, Asia markets anticipate a rollercoaster ride, with potential opportunities for savvy traders to navigate through a mixed session.”

Asia-Pacific markets are expected to have a mixed session as investors await the Bank of Japan’s monetary policy decision and economic data releases in the region. The central bank’s meeting will include discussions on inflation forecasts and adjustments to bond yield control. Japan’s Nikkei 225 is set to fall ahead of the July inflation reading, and Hong Kong’s Hang Seng index is also expected to open weaker. However, Australia’s S&P/ASX 200 opened 0.54% higher. In the US, stocks rallied on Monday, with the S&P 500 ending the day out of correction territory. The Dow Jones Industrial Average gained 1.58%, and the Nasdaq Composite rose 1.16%.

Meanwhile, oil prices fell as investors closely monitored the Israel-Hamas war and prepared for the Federal Reserve policy meeting later in the week. Brent crude declined 2.9% to $87.88 per barrel, while West Texas Intermediate futures dropped 3.5% to $82.59 per barrel.

Morgan Stanley’s chief US equity strategist, Mike Wilson, believes the likelihood of a fourth-quarter rally has decreased considerably over the past month. He has been forecasting the S&P 500 ending the year at 3900, making him one of the most bearish strategists on Wall Street. Wilson’s lower estimate for the broad market index remains despite initial bullish sentiments in September and expectations of better third-quarter earnings.

In other news, Bank of Japan officials are expected to consider allowing longer-term bond yields to rise above a 1% cap amid rising US bond yields and inflation concerns. Allowing flexibility on previous yield curve caps could provide some breathing room for the central bank. Rising US bond rates have resulted in money flowing to the dollar, putting downward pressure on the yen and exacerbating inflation. The yen rose against the US dollar following the Nikkei report.

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