(Bloomberg) — Asian stocks advanced on optimism that artificial intelligence will continue to drive profits at megacap technology companies reporting earnings this week, amid growing bets on a Federal Reserve interest-rate cut.
Shares in Japan and South Korea rose at the open, while Hong Kong is shut for a public holiday. While the S&P 500 posted a modest gain and closed at an all-time high, a gauge of the so-called ‘Magnificent Seven’ tech companies climbed 1.3%. 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 Wednesday.
The yen gained after US Treasury Secretary Scott Bessent weighed in on the Bank of Japan’s policy space, which fueled 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.
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.
That’s all happening as President Donald Trump tours Asia, which includes a scheduled meeting with his Chinese counterpart Xi Jinping.
The Wall Street Journal reported the US would roll back some tariffs if Beijing cracks down on the export of chemicals that produce fentanyl. Optimism around a deal has boosted copper to near record levels, and seen gold pull back from recent highs.
The Trump administration is also slated to sign a deal with South Korea aimed at bolstering cooperation in artificial intelligence, 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.
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 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.
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 frontrunner 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 stabilize 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 10:14 a.m. Tokyo time Hang Seng futures rose 0.9% Nikkei 225 futures (OSE) rose 1% Japan’s Topix was little changed Australia’s S&P/ASX 200 fell 0.7% Euro Stoxx 50 futures fell 0.1% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1653 The Japanese yen rose 0.3% to 151.69 per dollar The offshore yuan was little changed at 7.0937 per dollar The Australian dollar rose 0.2% to $0.6597 Cryptocurrencies
Bitcoin fell 0.4% to $112,403.04 Ether was little changed at $3,977.32 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 0.2% to $60.26 a barrel Spot gold rose 0.7% to $3,978.38 an ounce This story was produced with the assistance of Bloomberg Automation.
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