Asian shares recover as Fed hike bets lift the dollar after AI rout

what happened

Asian markets and US index futures edged up on Monday, recovering part of the ground lost in a turbulent week. Doubts about demand for AI chips had sent tech-heavy Asian markets into some of their steepest falls in years, according to Reuters. The MSCI index of Asia-Pacific shares excluding Japan gained 0.8% after dropping 4.6% the previous week. Japan's Nikkei added 2.5%, while Taiwan's TAIEX rose roughly 2.5% following its worst weekly fall in two decades.

Labour market data is now the main driver. US employers created 165,000 positions last month, far above economists' forecasts, which strengthened the case for a Fed rate increase in December. According to the CME FedWatch Tool, odds of a hike of at least 25 basis points at that meeting climbed to nearly 80%. New York Fed President John Williams said growth has stayed resilient despite repeated shocks, but inflation remains too high and must return to 2%.

The dollar index rose to around 102.2 and posted its biggest one-day gain in five months. The euro was little changed at $1.1148, while the yen strengthened 0.2% to 158.215 per dollar. Brent crude fell to $97.49 a barrel after Donald Trump said he was highly unlikely to order new strikes on Iran while talks continue. Bitcoin dropped more than 2% to $73,708 and ether slid about 5% to $2,223, its lowest in over two months, as investors worried a Democratic-controlled Congress would tighten crypto rules.

why it matters

Traders are weighing a possible Fed tightening cycle against an AI-linked equity sell-off. Earnings from CoreWeave, Applied Materials and Cisco will show whether the spending on AI infrastructure can be justified, while the US CPI reading due Tuesday could firm up expectations for a December hike.

market impact

Dollar: Fed hike bets support the currency, while crypto assets and tech stocks face pressure

• ▲US dollar pressure up — rate-hike expectations draw yield-seeking capital into the currency
• ▼Bitcoin pressure down — fears of tougher crypto rules weigh on demand

tags

instruments