Asian Stocks Fluctuate on Mixed US Tech Earnings, Central Bank Policy

Asian Markets React to Tech Earnings

Asian equity markets saw varied performance on Thursday (Oct 29), reacting to mixed signals from major US technology earnings. Alphabet's shares declined 10% in after-hours trading, erasing nearly US$400 billion from its market value and pushing Nasdaq futures down 1%. This followed significant cash burn linked to its AI ventures.

In contrast, Microsoft outperformed forecasts with robust cash flows, lifting its shares by 3%. Regionally, South Korea's KOSPI index fell 2.6%, despite Samsung Electronics reporting a near ninefold increase in third-quarter operating profit to a record high. This surge was driven by strong demand for AI chips. Samsung's shares slid over 4%. Separately, SK Hynix shares rose 1.3%, extending an 11% gain from the prior day on solid earnings.

Central Bank Policy and Rate Outlook

The US Federal Reserve maintained interest rates at its latest meeting, a widely anticipated decision. However, two committee members voted for a rate increase, indicating ongoing debate. Fed Chair Kevin Warsh expressed confidence regarding the inflation outlook during his press conference, which prompted a rally in US Treasuries.

Markets are currently pricing an 80% chance of a December rate hike, despite Warsh's more dovish tone. Attention now turns to September's US Personal Consumption Expenditures (PCE) data, the Fed's preferred inflation gauge, with core measure forecasts centred on a 0.3% monthly rise.

Elsewhere, the Bank of Canada raised interest rates on Wednesday for the first time in over three years, signalling potential further increases. The European Central Bank is expected to hold its rates steady later on Thursday.

Currency and Commodity Movements

In currency markets, the US dollar remained stable against its major counterparts, after experiencing a 0.2% dip overnight. The New Zealand dollar (kiwi) faced significant losses, trading at US$0.5626, after falling 1% overnight. This came after the Reserve Bank of New Zealand unexpectedly kept interest rates unchanged on Wednesday. Brent crude futures also saw a decline, falling 0.4% on Thursday to US$114.91 a barrel.

Investor Focus on AI and Asian Market Impact

The mixed reactions to AI-related earnings underscore the evolving investment landscape for technology companies. Jamie Hannah, deputy head of investments at VanEck, noted that while Alphabet's traditional advertising revenue faced AI-driven challenges, both Alphabet and Microsoft confirmed solid AI revenue generation from data centre growth and cloud services.

This trend resonates strongly in Asia, particularly for semiconductor manufacturers like Samsung and SK Hynix, whose earnings are increasingly tied to AI chip demand. For Asian investors, the Federal Reserve's rate path remains a key determinant for capital flows.

JP Morgan Asset Management's global market strategist Kerry Craig suggested that dissenting votes for a rate hike imply a 'when' not 'if' scenario for further tightening.

This implies that Asian tech companies, especially those in the AI supply chain, will see continued volatility linked to global interest rate expectations and the pace of AI infrastructure investment through early 2027.