Asian Stocks Jump on AI Enthusiasm Ahead of Earnings and Rate Decisions
Market Reactions and Key Drivers
By Ankur Banerjee
SINGAPORE, Oct 27 (Reuters) - Asian stocks surged on Tuesday as AI bellwether Anthropic's eagerly anticipated IPO filing lifted risk appetite ahead of tech earnings that will be a test for the AI trade, and central bank meetings that will influence near-term interest rates.
Anthropic IPO and AI Sentiment
Claude-owner Anthropic disclosed a steep loss and red-hot revenue growth in its filing for a US initial public offering, offering clues for investors dissecting the potential payoff from massive AI spending and its profitability.
While Anthropic's revenue figures were already largely known, the "decision to proceed with an IPO filing amid recent volatility in the AI trade may itself be seen as a vote of confidence," said James Ooi, chief market strategist at Tiger Brokers.
Meta Platforms' Fundraising Impact
Also boosting sentiment was Meta Platforms' plans to raise up to $95 billion in its largest-ever equity fundraising.
Regional Stock Market Performance
In stocks, tech-heavy South Korea's KOSPI gained more than 3.9% in its steepest one-day jump since early February. Still, the index is down 17% in October, reflecting investor angst around the AI trade in recent weeks.
Japan's Nikkei was 1.9% higher. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.9%. An index of US chip stocks rose 2.8% in overnight trade, clocking its biggest one-day jump in a month.
Nasdaq futures were flat while European stock futures dipped 0.18%.
AI Earnings and Central Bank Decisions
AI EARNINGS AND CENTRAL BANKS AHEAD
Currency Market Movements
Currency markets were muted ahead of policy decisions from the Federal Reserve, European Central Bank and Bank of Japan, with economists expecting all three to stand pat on interest rates, leaving the focus on comments from policymakers to gauge the rates outlook.
Upcoming Tech Earnings
More than a third of S&P 500 companies are scheduled to report earnings this week, including AI hyperscalers Alphabet, Microsoft and Amazon.com.
Investor Expectations and Capex Spending
"Given the increased AI scrutiny of late and circular arrangements, investors will want evidence that demand is broadening beyond these interconnected relationships to support the continued infrastructure expansion," said Anthony Saglimbene, Ameriprise's chief market strategist.
"Investors need confidence that aggressive capex spending reflects durable business needs and that profitability will hold up as new infrastructure comes into service," he said.
Commodities and Global Economic Outlook
Oil Prices and Geopolitical Risks
Brent crude futures eased 0.7% to $114.95 a barrel, drifting away from a six-month high as investors weighed the potential for a resolution in the US-Israeli war with Iran.
Nick Twidale, chief market strategist at ATFX Global, said supply remains the key concern, with any developments that threaten physical exports likely to see Brent quickly retest recent highs and potentially push back towards $120.
The nearly eight-month-old war has rippled across the Middle East, sending oil prices higher, stoking inflation worries and upending the global interest rates outlook, sharpening the focus on the central bank decisions this week.
Interest Rate Outlook and Treasury Yields
Fed policymakers have telegraphed they will not raise short-term borrowing costs again this week, but with inflation concerns still front and centre, investors believe a rate-hike pause will not last for long. Traders are pricing in a hike from the Fed in December.
"Can we expect (US) growth to hold up in an environment of higher rates?" said Geng Ngarmboonanant, head of macro and policy, multi-asset solutions, J.P. Morgan Asset Management.
"We think yes. We believe the US economy is going to be able to manage through higher interest rates."
The yield on the US 10-year Treasury note was steady at 4.992%, staying below 5% which it breached in September as investors scurried to Treasuries for safety during stock market tumult over AI worries.
Currency Safe Havens and Central Bank Policy
The Japanese yen has been the haven of choice in currency markets and was last steady at 157.61 per dollar ahead of the BOJ decision on Friday.
The Japanese central bank is widely expected to declare victory in a nearly 14-year battle to hit its 2% inflation target on Friday and emphasise the risk that prices could overshoot, signalling the chance of an interest rate hike as soon as December.
Gold and Other Commodities
In commodities, gold eased a touch and was last at $4,013.70 per ounce. [GOL/]
(Reporting by Ankur Banerjee in Singapore; Editing by Christopher Cushing and Lincoln Feast.)
