Asian stocks steady as AI, Mideast jitters recede; dollar firm on Fed bets

On Monday, Asian markets and US equity futures started on a steady note, gaining ground after a tumultuous week marked by uncertainties surrounding computer chip demand. The MSCI’s Asia-Pacific index of shares outside Japan increased 0.8%, reversing a 4.6% decline the previous week. Japan’s Nikkei index climbed 2.5%, while South Korean shares saw minor gains.

Taiwan’s benchmark index experienced a 2.5% rise, following its most significant weekly drop in two decades due to concerns over AI profitability and infrastructure demand. This sudden downturn followed Democratic Party victories in the US midterm elections. US stock futures, specifically the S&P 500 e-minis, also showed slight gains.

Earlier in the week, market sentiment had been buoyed by a strong rally on Wall Street following the conclusion of a chaotic week characterized by heavy AI-related losses. Concerns over AI's profitability, coupled with rising interest rates and the potential for increased AI regulation due to the US midterm results, had cast a shadow over global stocks.

Investors are now bracing for earnings reports from tech giants such as CoreWeave, Applied Materials, and Cisco Systems, as these results will shed light on the viability of AI investments amidst escalating costs.

Despite the recent volatility, market expert Kyle Rodda of Capital.com cautioned that the markets were not yet out of the woods. The recent mid-term elections have introduced additional regulatory risks, and the earnings season has been disappointing, with major companies underperforming in earnings expectations. The momentum continues to be bearish, according to Rodda.

In other news, oil prices dropped to $97.49 per barrel after Donald Trump expressed his skepticism about ordering further attacks on Iran, provided that peace talks to resolve the conflict progress. A robust jobs report released on Friday revealed that U.S. employers added 165,000 jobs in the previous month, more than double the forecast from economists.

This data, coupled with a forthcoming U.S. Consumer Price Index (CPI) reading, further strengthens the case for the Federal Reserve to raise interest rates in December. Anticipation for a potential rate increase at the Federal Reserve's December meeting has surged to nearly 80%, according to the CME FedWatch Tool.

Concurrently, New York Fed President John Williams underscored the resilience of U.S. economic growth amid successive shocks, but stressed the importance of curbing inflation back to 2%. This outlook bolstered the value of the U.S. dollar, which experienced its biggest single-day gain in five months, reaching 102.2 in the dollar index.

Meanwhile, the euro and yen remained relatively stable at $1.1148 and 158.215, respectively. Moreover, Bitcoin plummeted over 2% to $73,708, while Ether saw a 5% decrease to $2,223, both reaching their lowest points in over two months due to growing apprehension that a Democratic-controlled U.S. Congress may implement stricter regulations on cryptocurrencies.