SYDNEY – Asian stock markets surged to fresh records on Thursday, fueled by relentless investor conviction in the Artificial Intelligence (AI) theme, which continued to propel Wall Street to new heights. Meanwhile, geopolitical tensions saw a modest easing, causing oil prices to dip following news of a ceasefire agreement between Israel and Hamas.
The broader bullish sentiment saw MSCI’s broadest index of Asia-Pacific shares outside Japan firm 0.3%, while gold maintained its position robustly above the $4,000 mark.
AI Mania Drives Global Equities
The renewed appetite for AI-related technology saw the S&P 500 and Nasdaq hit all-time records overnight, rewarding the persistent “buy the dip” mentality among funds. Analysts at JPMorgan noted that the “AI Theme remains intact,” pointing to a continuous stream of multi-billion dollar investments into the sector.
Crucially, earnings expectations for the looming reporting season have been dramatically revised. Estimates for tech sector earnings growth have jumped to 20.9% from 15.9% back in June, with 81% of tech stocks seeing estimate increases, led notably by Nvidia (NVDA.O) and Apple (AAPL.O). Overall Q3 earnings are projected to grow 8%, with revenue up 6.3%.
Across Asia, this enthusiasm translated into strong gains:
- Japan’s Nikkei (.N225) climbed 1.5%, nearing its all-time peak, supported by offshore funds buying a net 2.5 trillion yen worth of Japanese shares last week.
- Taiwan stocks (.TWII) advanced 1.2% to a fresh record high.
- Chinese blue chips (.CSI300) added 0.4% as they reopened from a week-long national holiday. Beijing reported strong consumer spending of 809 billion yuan ($113.52 billion) and 888 million domestic trips during the break.
In a key trade development, Beijing also announced new restrictions on the export of rare earth minerals and equipment, a move likely to factor into ongoing trade discussions with the United States.
Oil Retreats on Geopolitical Breakthrough
Oil prices eased after news broke that Israel and Hamas had agreed to the first phase of a ceasefire plan to end the two-year conflict, lessening one major potential threat to global supply. U.S. President Donald Trump indicated he might travel to Egypt to discuss further steps in the deal. Brent crude dropped 0.6% to $65.89 a barrel. U.S. crude eased 0.7% to $62.12 per barrel.
In contrast, Gold held firm at $4,037 an ounce, marking a 3.9% gain for the week. The metal is being buoyed by the prospect of a series of U.S. rate cuts, strong central bank buying for reserves, and growing investor demand to hedge against the risk of a sustained decline in the U.S. dollar and widening government debt.
Fed Still on Course for Cuts
Bond markets were largely unperturbed by minutes from the latest Federal Reserve meeting, which showed a majority of members cautioned about upside inflation risks even as they sanctioned a policy easing.
Futures continue to imply a high 94% probability of another quarter-point cut in November, with a total of 44 basis points of easing priced in by year-end. Citi economists forecast that further labour market weakening will push most Fed officials to support cutting the policy rate at each of the next four meetings.
Yields on 10-year Treasuries were marginally lower at 4.115%.
Dollar Strength Persists
In the currency space, the dollar maintained its robust gains. It held near eight-month highs against the yen at 152.54, having surged 3.5% this week amid market concerns over increased Japanese government borrowing.
The Euro steadied at $1.1641, recovering slightly after touching a six-week low overnight following data that showed German industrial output suffered its biggest monthly fall in over three years in August. Investors are also monitoring France, awaiting news on whether President Emmanuel Macron can name a new prime minister capable of successfully hammering out a budget deal.
