Asian stocks advance as AI rally returns ahead of Big Tech earnings, Fed decision
Fed decision will be watched for clues on the policy outlook
Asian stocks advanced for a second day as enthusiasm over the artificial intelligence trade lifted equities ahead of earnings from tech megacaps and the US Federal Reserve’s interest-rate decision. Crude oil rose.
MSCI’s Asia-Pacific equities index climbed 1.2 per cent. South Korea’s Kospi Index led regional gains with a 6.1 per cent jump. SK Hynix rallied 9 per cent after the chipmaker unveiled plans to return about US$45 billion more to shareholders as profit surged sevenfold, beating estimates. Samsung Electronics climbed 8.5 per cent before its numbers on Thursday (Oct 29).
The upbeat tone in equity markets came ahead of results from Alphabet and Microsoft later on Wednesday, with Amazon.com set to report the following day.
Elsewhere, Brent snapped a two-day losing streak after the Wall Street Journal reported that the US told several Gulf countries to be prepared for a short, intense military campaign after the midterm elections. The report cited people briefed on the conversations.
The global oil benchmark advanced 1.3 per cent to trade around US$115.40 a barrel.
The New Zealand dollar slumped almost 2 per cent against the Aussie – the most since 2017 – after the country’s central bank surprisingly left rates unchanged. The yield on the benchmark 10-year Treasuries was up two basis points to 5.02 per cent as traders awaited the Fed announcement.
Optimism around the AI trade returned this week after a recent rout in chip stocks, but it faces a key test from megacap tech earnings in the next few days. Meanwhile, the Fed decision will be watched for clues on the policy outlook as elevated bond yields and persistent inflation complicate the case for lower borrowing costs.
“A wave of AI news sparked a relief rally after three weeks of pressure on the group,” Michael O’Rourke, chief market strategist at JonesTrading Institutional Services, wrote in a note. That news has “offered solace to investors that the large-scale AI firms can, and are proceeding to spend even if smaller firms are under pressure.”
In geopolitical news, Israeli Prime Minister Benjamin Netanyahu and opposition leader Gadi Eisenkot were neck and neck in the first election since the 2023 Hamas attacks, setting up a tense period of negotiations over who will form the next government.
Elsewhere, a Bloomberg gauge of the US dollar’s strength edged higher for a fourth consecutive day. Gold slipped 0.2 per cent to about US$4,050 an ounce.
Meanwhile, the Fed is expected to keep rates steady, even after inflation data for September came in hotter than expected. Wednesday’s Fed rate decision is set to be followed by policy announcements from the European Central Bank and Bank of Japan later this week.
If the Fed does stay put, Chairman Kevin Warsh could face pressure to explain policymakers’ rationale for not acting now after they voted unanimously in September to raise rates to address burgeoning inflation.
Projections released last month signalled Fed officials supported one additional hike in 2026, a forecast Warsh is likely to be asked about when he speaks to reporters after the meeting. Investors on Tuesday saw less than a 10 per cent chance of a quarter-point move this week, but priced in a hike at the final policy meeting of the year in December.
“The language from the FOMC will remain hawkish and vigilant on inflation,” said Damien McColough, head of fixed income research at Westpac Banking Corporation. “That, including any refocusing of the markets attention on the price of oil, should provide a bearish impetus.” BLOOMBERG
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