Asian markets fluctuated on Tuesday as investors balanced enthusiasm over the AI-driven tech surge on Wall Street with uncertainty about the US Federal Reserve’s next move on interest rates.
Hong Kong: Asian stock markets moved erratically on Tuesday as traders reacted to another Wall Street rally led by technology giants, while mixed signals from Federal Reserve officials left global investors uncertain about the future path of US interest rates.
The surge in technology equities worldwide has been largely powered by massive investments in artificial intelligence. However, concerns are mounting that valuations have reached unsustainable levels, heightening fears of a potential market correction.
Recent easing of trade tensions, following US President Donald Trump’s tariff reversal in April, and expectations of further Fed rate cuts have helped fuel the rally. Yet analysts warn that the gains, concentrated in a few tech firms, could prove volatile.
OpenAI and Amazon deal sparks fresh wave of tech optimism
Adding to the optimism, ChatGPT-maker OpenAI announced a $38 billion partnership with Amazon’s AWS cloud unit — one of several major deals it has struck this year, including with Oracle, Broadcom, AMD, and Nvidia.
“Even after the tariff-induced swoon in April, global equities have tacked on $17 trillion in market value, with the rally increasingly bottlenecked into the same handful of tech titans,” said Stephen Innes of SPI Asset Management.
He added that Amazon’s new deal “adds another rocket to the booster stack”, but warned that traders are “not asking how much fuel remains”.
Fed divisions deepen over rate cuts
Wall Street ended Monday mixed, with the tech-rich Nasdaq and S&P 500 rising, while the Dow slipped.
In Asia, Hong Kong, Wellington, Manila, and Jakarta gained ground, while Tokyo, Sydney, Singapore, Seoul, and Taipei dipped slightly. Shanghai remained flat.
Comments from Federal Reserve officials offered little clarity. While Chair Jerome Powell signalled uncertainty over a third rate cut this year, Governor Lisa Cook noted inflation pressures remain elevated due to tariffs.
Chicago Fed’s Austan Goolsbee warned of persistent inflation, while San Francisco’s Mary Daly said she was open to options in December. Trump nominee Stephen Miran, however, argued for further cuts.
National Australia Bank’s Rodrigo Catril summarised the mood: “The divergence in opinions reinforces that another rate cut in December is not a foregone conclusion — when driving in fog, it’s best to slow down.”
Markets react to weak US data
Fresh data showing a continued contraction in US manufacturing added to caution, with October marking the eighth consecutive month of weakening demand and output.
By 0230 GMT, Tokyo’s Nikkei was down 0.1%, Hong Kong’s Hang Seng up 0.2%, and Shanghai flat.
The US dollar edged higher against major currencies, while crude oil prices slipped slightly.
Analysts say the coming weeks could determine whether the AI-driven boom continues or faces a long-awaited correction — a decision likely to rest with both the Fed and investor faith in the power of technology.
(With AFP inputs)
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