Asian Stocks Advance on Tech Rebound Ahead of Fed: Markets Wrap

By Pune Media On Jan 29, 2025 26

(Bloomberg) — Stocks in Asia advanced to follow Wall Street’s tech-led rebound from a selloff that shook global markets, as focus turns to the Federal Reserve’s rate decision and US mega-cap earnings.

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Japanese and Australian shares rose. Most other major markets in the region are closed for Lunar New Year holidays. US equity futures slipped after the S&P 500 rose 0.9% and Nasdaq 100 advanced 1.6% on Tuesday, as Nvidia Corp. rallied 8.9% following the largest one-day value loss in history.

The share gains come after a rough start to the week on concern that a cheap artificial intelligence-model from Chinese startup DeepSeek might make valuations of the technology that has powered the bull market tough to justify. However, a re-evaluation saw the likes of Steve Cohen saying it may be good for the industry. Investors in the region will now be looking toward the Fed decision on rates and the start of the Big Tech reporting season on Wednesday — a key test for AI bulls.

“The dust has settled on DeepSeek and investors seem much more circumspect,” said Kyle Rodda, a senior market analyst at Capital.Com Inc. “We look to earnings and the Fed now — the former being more important because the latter will probably be a nothingburger!”

Fed officials are widely expected to hold borrowing costs steady on Wednesday against a backdrop of healthy demand and stubborn inflation. Bond traders are ratcheting up bullish bets on US Treasuries in hopes that Fed Chair Jerome Powell signals a cut in March is firmly on the table. A survey conducted by 22V Research shows 67% of respondents expect the reaction to the Fed Wednesday to be “mixed/negligible,” 21% said “risk-off” and 12% “risk-on.”

The yield on 10-year Treasuries declined 1 basis point to 4.52%. West Texas Intermediate oil steadied on Wednesday after gaining 0.8% on Tuesday.

“Simply put, the strong US fundamental story of strong growth, elevated inflation, and a more hawkish Fed continues to favor higher US yields and a stronger dollar,” Win Thin, a strategist at Brown Brothers Harriman, wrote in a note.

As for earnings in the US, while profits from the so-called Magnificent Seven behemoths are still rising — and far outpacing the rest of the market — growth is projected to come in at the slowest pace in almost two years.

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“The dust is now settling after Monday’s long overdue AI reckoning, and while we still believe in the AI-driven productivity story, investing in this sector going forward may not be as easy as it was over the past two years,” said Emily Bowersock Hill at Bowersock Capital Partners. “We expect investors to be more discerning and selective when it comes to AI investing.”

In Australia, core inflation eased by more than expected in the final three months of 2024. The Australian dollar dropped and the policy-sensitive three-year yield fell 5 basis points on bets that the Reserve Bank may embark on a monetary easing cycle soon.

Key events this week:

US Fed rate decision, Wednesday
Tesla, Microsoft, Meta, ASML earnings, Wednesday
Canada rate decision, Wednesday
Eurozone ECB rate decision, consumer confidence, unemployment, GDP, Thursday
US GDP, jobless claims, Thursday
Apple, Deutsche Bank earnings, Thursday
US personal income & spending, PCE inflation, employment cost index, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 10:42 a.m. Tokyo time
Japan’s Topix rose 0.5%
Australia’s S&P/ASX 200 rose 0.9%
Hong Kong’s Hang Seng rose 0.1%
Euro Stoxx 50 futures rose 0.1%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was unchanged at $1.0430
The Japanese yen was little changed at 155.68 per dollar
The offshore yuan was little changed at 7.2751 per dollar

Cryptocurrencies

Bitcoin rose 1.4% to $101,647.56
Ether rose 2% to $3,111.34

Bonds

The yield on 10-year Treasuries declined one basis point to 4.52%
Japan’s 10-year yield was unchanged at 1.190%
Australia’s 10-year yield declined five basis points to 4.37%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Rita Nazareth, Toby Alder and Rob Verdonck.