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By Gina Lee – Asia Pacific stocks were mostly up Tuesday morning, following a rebound in U.S. counterparts during the previous session. The possibility that policy tightening could be more gradual than expected allayed fears over the U.S. Federal Reserve’s latest hawkish tilt.

Japan’s 225 soared 3.03% by 10:43 PM ET (2:43 AM GMT) and South Korea’s gained 0.69%

In Australia, the jumped 1.41%.

Hong Kong’s inched up 0.01%. China’s rose 0.76% while the edged down 0.19%.

The rallied the most in five weeks during the previous session. The benchmark index even outperformed the , with a revival of the value trade in sectors like energy and financial also giving U.S. shares a boost.

Yields on longer-dated U.S. Treasuries rebounded during the previous session, even as short-end rates remained firmly in place. The rebound helped unravel some of the curve-flattening that took place after the Fed handed down its during the previous week, which hinted at earlier-than-expected interest rate hikes and asset tapering.

Investors also continue to assess the outlook as the focus remains squarely on inflation and the risks posed to the U.S. economic recovery from COVID-19.

Fed Chairman acknowledged in written remarks that there was a pickup in inflation. However, he also predicted that inflation would move back toward the central bank’s 2% target once supply imbalances are resolved.

Powell will also testify before a House of Representatives subcommittee hearing on the Fed’s pandemic emergency lending and its asset purchase programs later in the day.

Other Fed voices also chimed in, with New York Fed President John Williams (NYSE:) reiterating his boss’ viewpoint that the recent spike in inflation is a temporary phenomenon.

However, Williams’ counterpart in Dallas Robert Kaplan favors starting the process of reducing bond purchases “sooner rather than later,” echoing St. Louis Fed President James Bullard’s comment that it is “appropriate” for the Fed to begin asset tapering.

“The bigger picture is that the Fed is just beginning to adjust its policy stance… the overall level of rates and liquidity should stay supportive for markets, but maybe less so than has been the case over the last year,” AXA Investment Managers chief investment officer for core investments Chris Iggo said in a note.

Other investors remained cautiously optimistic.

“There’s probably going to be some back and forth here… there is a lot of cash on the sidelines right now. Some of that is going to be earmarked to go into the markets, and we think the best place right now to be investing is in the equity markets,” Wells Fargo (NYSE:) Investment Institute head of global asset allocation strategy Tracie McMillion told Bloomberg.

Across the Atlantic, the Bank of England will hand down its own on Thursday.

In cryptocurrencies, bitcoin tumbled in reaction to an intensifying crackdown in China, before stabilizing on Tuesday.

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