Asian Stocks Stabilize as AI and Mideast Fears Ease, Dollar Rises on Fed Rate Hike Bets
Market Overview and Key Drivers
By Jiaxing Li
Asian Market Performance
HONG KONG, Nov 9 (Reuters) - Asian markets and US equity futures made a steady start on Monday, wobbling into positive territory after a wild week where doubts about demand for computer chips sent tech-heavy markets in Asia into some of their steepest falls in years.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8% after sliding 4.6% last week. Japan's Nikkei index added 2.5% while Korean shares made small gains.
Taiwan's benchmark rose about 2.5% after notching its heaviest weekly drop for two decades last week, when fears about AI profitability and infrastructure demand turned into a rout following wins by Democrats at US midterm polls.
US stock futures, the S&P 500 e-minis, were a touch higher. On Friday, Wall Street equities rallied to end a chaotic week after heavy AI-related selling, helping to calm some nerves.
AI and Tech Sector Volatility
Global stocks had already been on shaky ground in recent weeks with the AI trade crumbling in the face of rising interest rates, until the US midterm results unleashed deeper worries about increased regulation of AI and data centres.
Earnings reports due this week from tech companies including CoreWeave, Applied Materials and Cisco Systems are set to put the profitability of AI ambitions to the test amid the massive costs of the build-out.
Meanwhile, a company-led investigation by industry bellwether Nvidia into its CEO Jensen Huang's relationship with an alleged Chinese spy could also draw some volatility.
Analyst Commentary
"The markets are far from being out of the woods yet," said Kyle Rodda, senior financial market analyst at Capital.com.
"Following last week's midterm elections that have led to increased regulatory risk and an overall underwhelming earnings season that's seen Magnificent Seven companies miss earnings expectations, the momentum remains skewed to the downside," he added.
Commodities and Geopolitical Developments
Elsewhere, Brent crude fell to $97.49 per barrel after US President Donald Trump on Sunday said he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progress.
Fed Rate Hike Bets and Currency Movements
US Economic Data and Fed Expectations
FED HIKE BETS BUILD
A blowout jobs report on Friday showed US employers added 165,000 jobs last month, more than twice economists' expectations and bolstering the case for the US Federal Reserve to raise interest rates in December. A US CPI reading due on Tuesday could further cement expectations for a hike next month.
Market expectations for an increase of at least 25 basis points at the central bank's December meeting moved up to nearly 80% in the wake of the report, according to the CME FedWatch Tool.
Fed Officials' Comments
Comments from officials also supported views for a rate hike, with New York Fed President John Williams saying US economic growth has remained remarkably resilient in the face of successive shocks but inflation is too high and it is essential to bring it back to 2%.
Currency and Crypto Market Reactions
That helped the greenback to notch its biggest single-day gain in five months. The dollar index, which tracks the greenback against a basket of currencies of other major trading partners, last traded at 102.2.
The European single currency was little changed at $1.1148. The yen was 0.2% stronger at 158.215.
Bitcoin fell by more than 2% to $73,708, while ether fell about 5% to $2,223, touching the lowest levels in over two months as investors fretted a Democratic-controlled US Congress will toughen regulation on cryptocurrencies.