Asia's tech-led pop and the AI through-line
Stocks across the region advanced for a second session, powered by the AI trade. MSCI's Asia Pacific equities gauge rose 1.5%, while South Korea's Kospi led with a 6.2% surge.
SK Hynix was the standout. Shares rallied about 9% after the chipmaker said profit swelled sevenfold, topping forecasts, and laid out roughly $45 billion in additional returns to investors. It also rolled out a separate 2026 shareholder-return plan set at 100 trillion won ($75 billion), highlighting the still-intense appetite for AI hardware.
With results from Alphabet and Microsoft due Wednesday and Amazon on deck Thursday, sentiment turned brighter. Michael O'Rourke of JonesTrading Institutional Services LLC, who serves as chief market strategist, said, "A wave of AI news sparked a relief rally after three weeks of pressure on the group." That news has "offered solace to investors that the large-scale AI firms can, and are proceeding to spend even if smaller firms are under pressure."
Oil, FX, and geopolitics in the mix
Brent crude snapped a two-day slide, up about 1.5% and trading near $115.50 a barrel. The Wall Street Journal said the US told several Gulf nations to prepare for a brief, high-intensity military operation after the midterm elections, citing people familiar with those talks.
Currency moves were just as lively. The New Zealand dollar tumbled almost 2% versus the Aussie - the sharpest drop since 2017 - after the central bank unexpectedly kept rates unchanged. A separate gauge of the dollar's strength held gains built over the prior three sessions, while gold eased to about $4,055 an ounce.
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Israel's politics also hovered in the background, as Benjamin Netanyahu, Israel's prime minister, and Gadi Eisenkot, the opposition's leader, were locked in a dead heat in the first vote since the 2023 Hamas attacks, leading to contentious talks to determine which side forms the next government.
Central bank watch and fresh data
The Fed's decision arrives before the European Central Bank and the Bank of Japan unveil decisions on policy later this week.
Markets largely expected the Fed to hold rates steady, even after September inflation came in hotter than anticipated. If rates are left unchanged, Chairman Kevin Warsh could face questions on why policymakers did not move now after a unanimous hike last month to address building inflation pressures.
Stateside data surprised to the upside. US consumer confidence rose in October, marking the first increase in four months, with the reading beating every estimate in a Bloomberg economist survey. Dan Pan, an Americas economist at Standard Chartered Bank, said the "moderate rebound in US consumer sentiment and decline in oil prices seem to have supported risk sentiment going into a busy week of central bank decisions." He added that a hawkish hold looks like the base case, but markets may be playing down the odds of a hike.
What this means for your portfolio
The AI rebound is back, but it now meets two gatekeepers: megacap tech earnings and a Fed decision complicated by higher yields and sticky inflation. Add in a rebound in oil and you get a mix that can nudge risk assets and rate-sensitive corners of your portfolio in a hurry.
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