Technology stocks powered Asian markets higher on Tuesday as investors pinned their hopes on US-Iran talks, while the dollar stood tall on bets that more interest rate hikes are needed to rein in inflation.
Strong demand for Meta Platform’s Muse AI assistant since its launch revived enthusiasm for the sector after safety warnings from leaders of AI bellwethers a week earlier triggered a global tech selloff.
MSCI’s broadest index of Asia-Pacific shares outside Japan hit a two-week high and was last up 0.75 per cent. Tech-heavy South Korean stocks jumped 2 per cent before paring gains, while Taiwan shares hit a record high and were last up 0.26 per cent. Japanese markets were closed for a holiday.
“The excitement around Meta Muse is adding weight to the idea that millions of people could eventually use persistent AI agents,” said Chris Weston, head of research at Pepperstone.
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“The combination of Meta Muse injecting a new shot of confidence in the CPU demand profile, lower crude prices, falling Treasury yields and optimism towards the US-China summit have supported the move.”
Nasdaq futures rose 0.1 per cent while European futures were 0.24 per cent higher.
China’s blue-chip stock index rose 0.18 per cent, while Hong Kong’s Hang Seng index gained 0.3 per cent. AI stocks in China and Hong Kong also surged.
Attention is turning to a high-stakes meeting between Donald Trump and Xi Jinping later this week, with investors watching for any indications that the leaders of the world’s two largest economies can prevent a further deterioration in relations.
Xi arrives in Washington on Wednesday for the first time in more than a decade amid growing optimism that a trade truce deal between the two nations will be extended and there could be potential cooperation over artificial intelligence.
William Bratton, head of cash equity research for APAC at BNP Paribas, expects this state visit to be similar to Trump’s visit to China in May.
“Lots of positive optics and words but not much to materially change underlying trajectories. In fact, we are more concerned by what happens after the state visit and not what happens during it,” he said.
Brent crude futures steadied at $100.65 per barrel after dropping over 3 per cent in the previous session, moving below the key $100 level briefly.
President Trump said he would be open to meeting Iranian President Masoud Pezeshkian, who is expected to be in New York this week for the UN General Assembly, helping lift sentiment and pushing bond yields lower.
“The drop in oil is a big factor,” said Nick Twidale, chief market strategist at ATFX Global. “Oil is the main driver and investors are jumping back into AI as has been the pattern this year.”
Investors are also contending with a fresh wave of rate hikes and hawkish signals from major central banks, reinforcing expectations of further tightening later this year. The shift has underpinned the dollar and piled pressure on the yen.
The yen was at 157.47 per US dollar, hovering near a three-week low after surrendering early-month gains driven by bets on a faster pace of Bank of Japan rate hikes.
The BOJ raised rates last week to a 31-year high but two dissenting votes and lack of explicit hawkish guidance disappointed investors, leaving the yen vulnerable and stoking intervention jitters.
“FX intervention remains a blunt tool to prop up currencies, and without a forceful monetary policy response it will be difficult for Japanese authorities to rein in the selloff in the yen,” said Matthew Ryan, head of market strategy at Ebury.
The Federal Reserve, by contrast, raised rates last week and warned its fight against inflation was not over, keeping the door open to further tightening.
The dollar index, which measures the US currency against six other units, was at 100.4, just shy of a seven-week high. Traders are pricing in a 56 per cent chance of a hike in October, compared with 43.5 per cent a week earlier, CME FedWatch tool showed. - Reuters
