Asian markets steady as Fed hike bets support dollar

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Asian markets steady as Fed hike bets

Highlights

MSCI Asia-Pacific index ex-Japan rises 0.8% and Nikkei jumps 2.5% as Asian markets rebound from AI-driven tech losses.
U.S. jobs report shows 165,000 jobs added last month, raising almost 80% odds of a December Fed rate hike of at least 25bps.
Dollar index climbs to 102.2 after its largest five-month gain, while bitcoin drops over 2% to $73,708 and ether falls 5% to $2,223.

Tech sentiment and earnings in focus

As reported by Reuters, MSCI's broadest index of Asia-Pacific shares outside Japan rises 0.8% after sliding 4.6% last week, with Japan's Nikkei up 2.5% and Taiwan's benchmark gaining about 2.5% after its heaviest weekly drop in two decades.

Markets are stabilising after a volatile stretch in which concerns about AI profitability and infrastructure demand triggered steep declines across tech-heavy bourses in Asia. Wall Street equities rallied on Friday after heavy AI-related selling, helping calm investors, while U.S. stock futures are slightly higher.

Investors are now watching earnings due this week from CoreWeave, Applied Materials and Cisco Systems for signs on whether costly AI build-outs can deliver returns. A company-led Nvidia investigation into Chief Executive Jensen Huang's relationship with an alleged Chinese spy could also add volatility.

Kyle Rodda, senior financial market analyst at Capital.com, says markets are still not out of the woods after last week's U.S. midterm elections increased regulatory risk and an underwhelming earnings season left momentum skewed to the downside.

Dollar strength and policy expectations

Brent crude falls to $97.49 a barrel after U.S. President Donald Trump says on Sunday he is highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progress.

A stronger-than-expected U.S. jobs report, showing employers added 165,000 jobs last month, boosts the case for the Federal Reserve to raise interest rates in December. Markets now price nearly an 80% chance of an increase of at least 25 basis points, according to the CME FedWatch Tool, while a U.S. CPI reading due on Tuesday could further cement that view.

Comments from New York Fed President John Williams also support expectations for tighter policy, as he says U.S. growth remains resilient but inflation is still too high and must return to 2%. The dollar index last trades at 102.2 after its biggest single-day gain in five months, while the euro is little changed at $1.1148 and the yen is 0.2% stronger at 158.215.

Cryptocurrencies remain under pressure, with bitcoin down more than 2% at $73,708 and ether falling about 5% to $2,223, its lowest level in more than two months. Investors are concerned that a Democratic-controlled U.S. Congress will tighten regulation on digital assets.

In our earlier article on the S&P 500’s push toward 8,000, we outlined how an AI-megacap-led rally was running into a tougher test from third-quarter earnings expectations, higher oil prices, elevated Treasury yields and midterm-election uncertainty. We also highlighted growing concerns about narrow market breadth and concentration risk, as well as signs of caution in tech sentiment despite strong AI-related demand signals from major chipmakers.

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