Investors in Asian markets found a reason for optimism on Monday as fresh hopes for a reduction in US interest rates brought a measure of calm, following a highly volatile week dominated by anxieties over a potential technology stock bubble.
Market Recovery After a Turbulent Period
The scramble for artificial intelligence-related investments has been a primary driver behind this year's significant equity gains, pushing several tech companies to record valuations. Notably, the chipmaking giant Nvidia last month became the first firm to reach a market value exceeding $5 trillion.
However, a sense of caution has been growing among investors. Many fear that the enormous sums of money poured into the AI sector may be overinflating its value, with profits potentially taking longer to materialise than anticipated. This has led to widespread warnings about a possible market correction.
These concerns were amplified in recent weeks as expectations diminished for the Federal Reserve to implement a third consecutive interest rate cut in December. Stubbornly high inflation figures have overshadowed signs of weakness emerging in the US labour market.
A Pivotal Statement from the Fed
Market sentiment received a crucial boost on Friday when John Williams, the President of the Federal Reserve Bank of New York, stated that he still sees 'room for a further adjustment' at the central bank's upcoming policy meeting scheduled for December 9-10.
This comment had an immediate and dramatic effect on market predictions. The perceived probability of a December rate cut surged to approximately 70 percent, a significant jump from just 35 percent earlier in the week.
All attention is now focused on the release of the US producer price index this week. This report has taken on heightened importance as it will be one of the final major economic indicators available to policymakers before their meeting. Other crucial reports have been postponed or missed entirely due to the recent US government shutdown.
Mixed Performance Across Asian Bourses
Following a rally on Wall Street that capped a difficult week, most Asian markets started the new week on a positive note.
Hong Kong and Seoul led the gains, each jumping more than one percent. Markets in Sydney, Singapore, Wellington, and Taipei also posted solid advances. However, Shanghai and Manila experienced retreats. The Tokyo market was closed for a public holiday.
Despite the improved mood compared to the fractious trading of the previous week, a degree of uncertainty continues to hang over riskier assets. The cryptocurrency Bitcoin was hovering around $87,000. While this is a recovery from its seven-month low of $80,553, it remains well below the record high of $126,200 it hit just last month.
Key market figures around 0230 GMT confirmed the positive trend, with the Hang Seng Index up 1.4 percent and US futures also advancing, signalling continued positive sentiment.
