Asian financial markets experienced significant gains on Tuesday as growing expectations for another Federal Reserve interest rate cut boosted investor confidence across the region.
Fed Officials Signal December Rate Reduction
Market optimism surged following dovish comments from several Federal Reserve officials that strongly indicate a potential rate cut at the upcoming December 9-10 policy meeting. Fed governor Christopher Waller told Fox Business that his primary concern has shifted from inflation to the labor market, stating he is "advocating for a rate cut at the next meeting."
San Francisco Fed president Mary Daly reinforced this position, telling the Wall Street Journal she feels less confident about the labor market's stability. New York Fed chief John Williams also noted he sees "room for a further adjustment" at the December gathering.
Market Reaction and Trading Figures
The probability of a rate cut jumped dramatically from approximately 35% last week to about 90% currently, according to market analysts. This shift triggered substantial gains across global markets.
Wall Street set the tone with the S&P 500 climbing 1.6% and the Nasdaq surging 2.7% on Monday, driven by strong performances from tech giants including Alphabet, Meta, and Amazon.
Asian markets continued this positive trend on Tuesday with Hong Kong's Hang Seng Index rising 1.2% to 26,031.67 and Shanghai's Composite gaining 1.1% to 3,887.86. Tokyo's Nikkei 225 advanced 0.4% to 48,815.27 during trading hours.
Tech Sector Revival and AI Concerns
Technology stocks enjoyed a notable recovery after recent selling pressure driven by concerns about inflated AI sector valuations. While questions remain about the sustainability of the AI-driven market advance, analysts suggest the market is becoming more selective.
Charu Chanana of Saxo Markets observed that "the broad 'everything goes up' phase of the AI trade is fading" and being replaced by a more nuanced market that "rewards fundamentals over narratives."
Additional positive sentiment came from improving US-China relations, with former President Donald Trump praising "extremely strong" bilateral ties following a conversation with Chinese leader Xi Jinping. Both leaders confirmed plans for reciprocal visits in 2026.
The combination of anticipated looser monetary policy and renewed confidence in technology sectors appears to have temporarily eased investor concerns about both inflation pressures and the sustainability of the AI investment boom.
