(Oct 29): Asian stocks advanced on Wednesday on optimism that artificial intelligence (AI) will continue to drive profits at megacap technology companies reporting earnings this week, amid growing bets on a US Federal Reserve (Fed) interest-rate cut.
MSCI’s regional stock gauge rose 0.4%, with Japan and South Korea leading the gains. Yet, in both the Nikkei 225 and the Kospi, losers outnumbered winners. Similarly, almost 400 shares declined in the S&P 500 index, even though the gauge gained a modest 0.2% to close at an all-time high.
Tech was in focus once again as Nvidia Corp added almost 5% after chief executive officer Jensen Huang announced a flurry of new partnerships and dismissed concerns about an AI bubble. Its supplier SK Hynix Inc jumped as much as 4% in Seoul after reporting a record profit on Wednesday. Advantest Corp shares soared 20% after the Japanese supplier of chip testers reported strong quarterly operating profits on the back of AI demand.
With five big tech companies — representing roughly a quarter of the US equity benchmark — set to report between Wednesday and Thursday, investors will soon gauge whether the billions poured into computing infrastructure will keep flowing and ultimately deliver returns. Adding to the week’s momentum, Fed officials are poised to announce their rate decision on Wednesday, with Wall Street largely betting on a quarter-point cut.
“The markets have a massive wall of event risk to scale this week,” wrote Kyle Rodda, a senior analyst at Capital.com in Melbourne.
See also: Asian rally set to stall after Powell rate cut caution
In other corners of the market, the yen gained after US Treasury Secretary Scott Bessent weighed in on the Bank of Japan’s policy space, which fuelled rate-hike bets. A gauge of the dollar edged lower for a third day. Oil held a three-day drop amid mounting signs of oversupply, while gold inched up after three days of losses.
The moves come as US President Donald Trump tours Asia, which includes a scheduled meeting with his Chinese counterpart Xi Jinping.
Trump said he expects to lower tariffs the US has imposed on Chinese goods over the country’s role in the fentanyl crisis, with Beijing planning further moves to address the export of precursor chemicals critical to manufacturing the drug.
See also: China commerce minister says US and China can find solutions
The Trump administration is also slated to sign a deal with South Korea aimed at bolstering cooperation in AI, quantum computing and 6G, according to a US official — part of a bid to maintain a competitive edge with China in an expanding race for tech supremacy.
Still, the technology sector remains the key focus of market participants. The so-called ‘Magnificent Seven’ group is projected to deliver profit growth of 14% in the third quarter, according to data compiled by Bloomberg Intelligence.
That’s nearly twice the 8% expected profit growth for the broader S&P 500, but it also would be the slowest pace since the first quarter of 2023.
However, big techs have a history of reporting earnings that far exceed Wall Street estimates. And that’s what many investors are counting on.
Over Wednesday and Thursday, Microsoft Corp, Alphabet Inc, Meta Platforms Inc, Amazon.com Inc and Apple Inc will all report results.
“We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for now are willing to overlook this as the AI arms race heats up.”
Also buoying sentiment were bets the Fed will cut rates on Wednesday, with traders hoping for clarity as to when officials will stop shrinking the central bank’s portfolio of securities. Bets have grown they may end quantitative tightening as soon as this month.
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Expectations are set for two things from this week’s Fed meeting — officials will lower rates by a quarter percentage point and chair Jerome Powell will offer little guidance as a growing divide among policymakers blurs the path ahead.
Corporate news:
- OpenAI is giving its long-time backer Microsoft Corp a 27% ownership stake as part of a restructuring plan that took nearly a year to negotiate.
- Private equity firm Boyu Capital has emerged as the front runner in Starbucks Corp’s search for a partner in its China business.
- Apple Inc is preparing major changes to its MacBook Air, iPad mini and iPad Air lines, with a plan to give the popular devices higher-end displays.
- Visa Inc reported fiscal fourth-quarter earnings that topped estimates as consumers continued to swipe, tap and insert their credit cards to transact globally.
- Ping An Insurance (Group) Co said profit rose 11.5% in the first nine months of this year, as a stock market rally lifted investment returns and policy sales expanded.
- Bank of China Ltd reported a 5% increase in third-quarter profit, as the lender managed to stabilise its net interest margin despite mounting challenges from weakening credit demand.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10.56am Tokyo time on Wednesday
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 fell 0.8%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures fell 0.1%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1648
- The Japanese yen rose 0.2% to 151.86 per dollar
- The offshore yuan was little changed at 7.0967 per dollar
Cryptocurrencies
- Bitcoin fell 0.3% to US$112,465.36
- Ether was little changed at US$3,984.22
Bonds
- The yield on 10-year Treasuries was little changed at 3.98%
- Japan’s 10-year yield advanced one basis point to 1.650%
- Australia’s 10-year yield advanced four basis points to 4.21%
Commodities
- West Texas Intermediate crude rose 0.4% to US$60.40 a barrel
- Spot gold rose 0.6% to US$3,975.11 an ounce
Uploaded by Tham Yek Lee
