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(Bloomberg) -- Stocks in Asia gained on bets that the upcoming US consumer price report will allow the Federal Reserve to start easing in September. The New Zealand dollar slumped following a surprise rate cut by the country’s central bank.

The MSCI Asia Pacific Index climbed for a fourth session, with shares in New Zealand and Taiwan jumping around 1%. The gains came after the US producer price index rose less than forecast, helping to fuel a 1.7% rally in the S&P 500. Japanese stocks fluctuated as the yen strengthened.

The easing of price pressures in the US has bolstered confidence that officials can start lowering borrowing costs and refocus on supporting the labor market. In Asia, the earlier-than-expected start of an easing cycle in New Zealand has the potential to reshape interest-rate dynamics, with the Reserve Bank typically seen as spearheading the region’s monetary cycle.

“Global markets seem to be sounding the all-clear signal following the recession scare last week,” said Jun Rong Yeap, a strategist at IG Asia Pte. “Further inflation progress in US producer prices, which may be a precursor for more easing in the consumer prices as well, has offered additional legs to the risk rally.”

Treasuries were little changed after rising across the curve in the previous session, with positioning data showing traders remain bullish. A Bloomberg gauge of the dollar steadied around a four-month low.

New Zealand’s 10-year benchmark bond yields slumped as the central bank indicated more rate cuts ahead, while the local currency weakened 0.8% against the greenback.

In Japan, the Nikkei erased gains following a report that Prime Minister Fumio Kishida won’t run for a second term as leader of the long-ruling Liberal Democratic Party in September. The yen reversed losses against the dollar and strengthened toward the 146-per-dollar mark.

Emerging market currencies strengthened amid the overnight weakness in the dollar. The MSCI EM Currency index hit its highest level since April 2022, rising 0.4%.

China Earnings

Elsewhere in Asia, Chinese stocks fell following data that showed bank loans to the real economy contracted for the first time in 19 years. Investors await earnings from Tencent Holdings Ltd. and its buyback plans.

“The Chinese internet giants reporting this week will be very important to see if consumption weakness in China weighs on margins and ROIs, and which sub-segment vertical such as gaming may be brighter spots,” said Britney Lam, head of equities-long/short at Magellan Investments Holding Ltd. “Valuation is attractive but earnings momentum is key.”

Overnight, the S&P 500 saw its biggest four-day rally this year. The Nasdaq 100 climbed 2.5%.

Wall Street’s favorite volatility gauge — the VIX — tumbled to around 18. Swap traders priced in an about 40 basis-point Fed cut in September and a total rate reduction of over 105 basis points for 2024.

The US producer price index for final demand increased 0.1% from a month earlier, less than the 0.2% seen in a median forecast. For the data due Wednesday, forecasters expect the consumer price index, and a “core” gauge excluding food and energy, to have both advanced 0.2% in July, according to the median estimates in a Bloomberg survey.

“The runway is clear for the Fed to cut rates in September,” said Jamie Cox at Harris Financial Group. “If data like this persists, the Fed will have plenty of room to cut rates further this year.”

Oil climbed in Asia trading, rebounding from losses on Tuesday, as an industry report pointed to a sizable drop in US crude stockpiles and tensions simmered in the Middle East. Gold fell.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.