Asian Stocks Gain on Oil Slide and Anticipation of US Inflation Report
Market Overview and Key Drivers
By Ankur Banerjee
SINGAPORE, Nov 10 (Reuters) - Asian stocks rose on Tuesday as a drop in oil prices after US President Donald Trump said he plans to hold off on new military strikes against Iran lifted sentiment ahead of US inflation data that could sway the near-term interest rate outlook.
Oil Prices and Geopolitical Tensions
Brent crude futures were hovering at their lowest levels since early September, well below $100 per barrel, as investors pinned their hopes on possible talks between US and Iran. They were last down 1% at $91.56 a barrel.
The US-Israeli war with Iran, which erupted at the end of February, has stoked inflationary concerns across the globe, spurring major central banks to raise rates in recent months.
Market Sentiment and Analyst Insights
Nick Twidale, chief market strategist at ATFX Global, said the latest developments offered hope that an end to the conflict could be approaching, but there was still a considerable gap between diplomacy and a lasting peace agreement.
"The risk now is that markets have moved too far, too quickly ... any indication that negotiations are faltering could see a substantial rebound in prices as traders rapidly rebuild the geopolitical risk premium," he said.
Stock Market Performance
The slump in oil prices eased inflation worries and helped lift stocks after last week's rout as a sweeping victory by Democrats in the US midterm elections fed concerns that new regulations could dent the durability of the AI trade.
South Korea's KOSPI rose over 5%, while Japan's Nikkei gained about 3% in early trading. MSCI's broadest index of Asia-Pacific shares pushed 1.5% higher, moving away from the seven-month low it hit last week.
On Monday, the S&P 500 clocked its biggest one-day jump since April, closing up 2.35% while the Nasdaq closed 2.7% higher, its best day in over four months.
AI Trade and Investor Expectations
"We believe resets in expectations are healthy, and the AI trade appears to be working through a reset of its own at the moment," said Anthony Saglimbene, chief market strategist at Ameriprise.
Earnings reports due this week from tech companies including CoreWeave, a barometer of investor anxiety over AI, will be another test for markets as investors fret about the cost of the AI buildout.
Saglimbene said Anthropic's prospective IPO could be an important test of investor confidence.
Nvidia Remains at the Centre of Storm
Market focus remains on Nvidia after the second-most valuable company in the world said its board was probing whether CEO Jensen Huang had been the target of a foreign intelligence operation.
A media report alleged he had a close relationship with a Chinese businesswoman who passed information to Beijing. Huang has said he was unfaithful to his wife without disclosing details. Shares of Nvidia, which is due to report earnings next week, fell 4.2%.
Leadership and Company Performance
Daniel Morgan, portfolio manager at Synovus Trust, said certain personalities in the technology space were so intertwined with the success of the company it was hard to separate the two. Morgan holds Nvidia shares.
"But, the companies can still be successful long after the original founders have taken on a lesser role," he said, adding he remained confident that Nvidia would continue to maintain its lead in the GPU AI chip market even if Huang was forced to step down to a lesser role.
Inflation Data Sets Up Rates Outlook
Expectations for US Inflation
All eyes will be on US inflation data later in the day, with prices likely to have increased at a moderate pace in October, economists said, and remaining stubbornly high enough for the Federal Reserve to raise interest rates next month.
Economists polled by Reuters expect headline consumer prices to have risen 0.3% last month, with core prices posting a 0.2% increase.
Interest Rate Projections and Market Impact
Traders are pricing in an 84% chance of a rate hike next month versus 74% a week earlier, a CME FedWatch tool showed after a blowout October jobs report on Friday.
The 2-year note yield, which typically moves in step with Fed interest rate expectations, was 1.4 basis points higher to 4.56%. The US dollar was steady in Asian hours. [FRX/]
(Reporting by Ankur Banerjee in Singapore; Editing by DJ Yap)
