Asia stocks climb as AI momentum overpowers hotter US inflation

AI tailwind meets rate headwind

Investors kept leaning into the AI story, lifting Asian shares despite inflation in the US coming in above forecasts. The MSCI Asia Pacific Index added 1% after logging its strongest two-day stretch through Tuesday in more than three months, with technology names doing the heavy lifting.

Nasdaq 100 futures advanced 1.2%, erasing the cash index's earlier decline. The boost followed CoreWeave's better-than-expected earnings and a raised full-year outlook, which helped its stock climb about 6% in late US trading and offered some relief to the neocloud group that powers AI developers.

Anticipation is also building around Anthropic's market debut. Bankers are weighing plans to lift the Claude maker's IPO valuation to $1.5 trillion or higher, the Financial Times reported, signaling strong demand. People familiar said the deal drew orders covering all shares at launch, and some existing holders are reallocating a slice to new buyers. OpenAI's quarterly sales reached $10 billion for the first time, people familiar with the matter said, in a separate development.

Bonds price in tighter Fed path

Regional debt fell as borrowing costs moved higher. Benchmark borrowing costs in Japan and Australia rose by a minimum of six basis points, echoing Tuesday's Treasury selloff as traders strengthened bets on a December Fed hike. Cash Treasuries were shut Wednesday because of a US holiday.

On Tuesday, the two-year Treasury yield leapt by 17 basis points to 4.73%, marking the largest single-session increase in 19 months. Futures pricing now points to a quarter-point move at next month's Fed meeting, with some odds attached to a larger step. Dallas Fed President Lorie Logan said faster increases may be needed this winter to cool inflation.

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Earlier, Governor Christopher Waller said a 0.5-point increase in December could be justified. Chicago Fed President Austan Goolsbee described the October inflation print as disturbing and said policymakers need to confront persistent price pressures.

Inflation keeps the pressure on

In October, core CPI - which excludes food and energy - increased 0.3% from the previous month, beating forecasts for a third straight time. Headline CPI climbed 0.4% as essential costs increased broadly.

The policy backdrop has been tough on tech before. The group swung sharply last week after Democrats' sweep of Congress stoked worries about stricter oversight of AI and a potential cooling in US data center buildouts. Against that caution, Lindsay Rosner at Goldman Sachs Asset Management said, "A December hike is our firm base case despite wider AI jitters, and stubborn inflation means we cannot rule out further hikes in 2027."

Portfolio view

Positioning is already shifting. Morgan Stanley prime brokers said global equity hedge funds cut exposure at the fastest pace in more than ten years through the first week of November. Elsewhere, a dollar gauge was flat after a 0.5% gain on Tuesday, and crude ticked up following a two-day slide.

The bottom line: AI strength is still propping up growth stocks, but higher short rates and rising global yields are tightening the screws on valuations. Know what is powering your tech exposure and what it stands to lose if the Fed stays hawkish.

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