Asian Stocks Steady as AI and West Asia Risks Ease; Dollar Firms

Asia’s Rebound Tests Whether the Tech Sell-Off Has Run Its Course

A modest recovery in Asian equities offers some relief, but earnings, AI spending and the prospect of higher US rates remain in focus.

A bounce after steep losses, not yet a clear reversal

Asian equities began the week on a firmer note after the previous week’s sharp decline, when doubts about demand for computer chips and the profitability of artificial intelligence spending unsettled technology-heavy markets. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%, following a 4.6% fall last week. Japan’s Nikkei gained 2.5%, while South Korean shares posted smaller advances.

Taiwan’s benchmark climbed about 2.5% after suffering its heaviest weekly drop in two decades. The rebound, alongside Friday’s rally on Wall Street and slightly higher US equity futures, suggests investors were willing to return to risk after a turbulent stretch. But one session of gains does not settle the question of whether AI-related selling has run its course. The size of last week’s losses leaves sentiment vulnerable to fresh disappointments.

AI earnings face a tougher test

Investors are looking beyond enthusiasm for AI to whether the large costs of building the required infrastructure can translate into sustainable returns. Earnings due from CoreWeave, Applied Materials and Cisco Systems are expected to put that question in focus. Their reports may help markets judge whether spending plans are supported by demand and business prospects, rather than expectations alone.

The concerns extend beyond company results. The article points to increased regulatory risk for AI and data centres after the US midterm results, as well as a disappointing earnings season in which several Magnificent Seven companies missed expectations. Nvidia is also conducting a company-led investigation into its chief executive’s relationship with an alleged Chinese spy, a development that could add company-specific volatility. Together, these factors mean investors may scrutinise both the commercial case for AI and the policy environment around it.

Jobs data shifts the rate outlook and lifts the dollar

US employers added 165,000 jobs last month, more than twice economists’ expectations. The stronger-than-expected report increased the case for a Federal Reserve rate increase in December. Market expectations for a rise of at least 25 basis points moved to nearly 80%, while an upcoming US consumer price index reading could further influence those expectations.

The prospect of higher rates helped the dollar record its biggest single-day gain in five months. For global investors, this creates a counterweight to the equity rebound: firmer rate expectations can make risk assets less comfortable to hold, even as a stronger US economic reading supports confidence in growth. The dollar index stood at 102.2, while the euro was little changed at $1.1148 and the yen strengthened 0.2% to 158.215.

Oil eases, while crypto remains under pressure

Brent crude fell to $97.49 a barrel after US President Donald Trump said he was highly unlikely to order fresh attacks on Iran if talks to end the conflict progress. That eased one immediate source of geopolitical concern for markets. The move remains tied to the prospects for talks, however, and does not remove uncertainty around the conflict.

Cryptocurrencies moved lower amid concerns that a Democratic-controlled US Congress could tighten regulation. Bitcoin fell more than 2% to $73,708, while ether dropped about 5% to $2,223, touching its lowest level in more than two months. The contrast with firmer equities underscores that the recovery in broader markets has not translated into an across-the-board return of risk appetite.

Key Highlights

• Asia-Pacific shares outside Japan gained 0.8% after falling 4.6% last week.
• Taiwan’s benchmark rose about 2.5% following its heaviest weekly drop in two decades.
• Results from CoreWeave, Applied Materials and Cisco Systems will test confidence in AI-related spending.
• Strong US jobs data lifted expectations of a December Fed rate increase to nearly 80% for a move of at least 25 basis points.
• Brent crude slipped to $97.49 a barrel as concern about fresh US attacks on Iran eased.
• Bitcoin and ether fell as investors weighed the possibility of tighter US cryptocurrency regulation.

Investor Note: The Asian rebound may indicate a pause in selling, but it does not yet resolve concerns about AI returns, regulation or interest rates. Investors may want to watch the upcoming technology earnings and US inflation reading for evidence that could strengthen—or challenge—the recovery.