Asian stocks set to gain on resurgent AI optimism

ASIAN stocks looked poised to rise Wednesday (Oct 28), tracking gains on Wall Street as renewed enthusiasm for artificial intelligence lifted equities ahead of earnings from industry giants and the Federal Reserve’s rate decision.

Equity-index futures for Australia, Japan and South Korea pointed higher after a closely watched gauge of US chipmakers jumped 3.6 per cent.

US stock futures were little changed after the Nasdaq 100 climbed 1.3 per cent for its best session in more than a month, while the S&P 500 advanced 0.6 per cent.

Meta Platforms’s US$25 billion share sale was five times oversubscribed, while Oracle expanded its partnership with OpenAI.

Three of the world’s biggest companies – Alphabet, Microsoft and Amazon.com – are also expected to show healthy growth when they report earnings this week.

US oil broadly held the previous session’s losses, with Brent below US$114 a barrel as traders assessed efforts to de-escalate tensions in the Persian Gulf. Treasuries were little changed, while the US dollar advanced.

Optimism around the AI trade has re-emerged as a string of deals and fundraising highlights the scale of investment continuing to flow into the industry. Meta’s US$98 billion capital raise, SpaceX’s US$40 billion equipment-finance lease and Anthropic’s S-1 filing helped ease concerns that strains among smaller players may threaten the broader build-out.

“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 LLC, 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.” 

Meantime, US Fed policymakers are expected to keep rates steady on Wednesday, buying time before potentially raising them again. Chairman Kevin Warsh, who has offered little guidance on the path ahead, may avoid signalling much about December while leaving intact market expectations for a hike.

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The decision comes after data showed US consumer confidence unexpectedly rose in October for the first time in four months, buoyed by brighter views on the labour market and business conditions. The reading topped all forecasts in a Bloomberg survey of economists.

The “moderate rebound in US consumer sentiment and decline in oil prices seem to have supported risk sentiment going into a busy week of central bank decisions,” said Dan Pan, an Americas economist at Standard Chartered Bank. “A hawkish hold seems to be the baseline but we would argue that the market might be underestimating the risks for a hike.”

The Fed will be followed by rate decisions from the European Central Bank and Bank of Japan later this week.

Oil dipped Tuesday as traders weighed efforts to de-escalate tensions in the Persian Gulf and awaited consequential elections, including in Israel.

Prime Minister Benjamin Netanyahu, who launched the war on Iran with US President Donald Trump in February, has pledged to topple Teheran’s regime. His challenger, opposition leader Gadi Eisenkot, says Iran’s nuclear programme must be stopped but that regime change is “not an achievable goal.”

“If Netanyahu loses, it makes it difficult for Trump to go it alone, assuming Eisenkot is not willing to jump in,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. “To a certain degree, it would be a warm-up vote for the US midterms,” where voter concerns span disillusionment with the Iran war and soaring energy costs, he added. BLOOMBERG