Volkswacht Bodensee - Asian markets swing as trades eye tech rally, US rate outlook

A flood of multi-billion-dollar investment into artificial intelligence has been a key driver of the surge in mostly technology equities across the globe this year, sending valuations to record highs.

The rally has been helped by easing trade tensions since US President Donald Trump's April tariff bombshell and expectations that the Fed will continue lowering borrowing costs

There is also a fear of missing out, in turn pushing prices up further, but there is increasing talk that the gains may have gone too far -- with most of the gains coming from the tech sector -- and a painful correction could be on the way.

ChatGPT-maker OpenAI signed a $38 billion deal with Amazon's AWS cloud computing arm, marking its latest huge tie-up following agreements with Oracle, Broadcom, AMD and chip titan Nvidia.

"Even after the tariff-induced swoon in April, global equities have tacked on $17 trillion in market value, with the rally increasingly bottlenecked into the same handful of tech titans," wrote SPI Asset Management's Stephen Innes.

"It's as if the entire market has narrowed to a single crowded corridor, the walls lined with AI logos and venture dreams.

"Amazon's move simply adds another rocket to the booster stack -- and traders are cheering the ignition, not asking how much fuel remains."

Wall Street ended on a mixed note, with the tech-rich Nasdaq rising along with the S&P 500 but the Dow in the red.

Asia struggled to extend Monday's advances.

Hong Kong rose with Wellington, Manila and Jakarta but Tokyo, Sydney, Singapore, Seoul and Taipei edged down with Shanghai flat.

Remarks from Fed officials did little to provide support for further buying after boss Jerome Powell indicated last week that a third rate cut this year -- after one in each of the past two meetings -- was not definite.

Governor Lisa Cook said she saw inflation remaining elevated in the coming year as tariffs bite, pointing out that some businesses had indicated they were running down inventories before passing on costs to consumers.

"Looking ahead, policy is not on a predetermined path," Cook said. "We are at a moment when risks to both sides of the dual mandate are elevated," she added, referring to the bank's target to support jobs while keeping rates at a level to put a cap on inflation.

"Every meeting, including December's, is a live meeting."

Meanwhile, Chicago Fed chief Austan Goolsbee said his main worry was inflation, while San Francisco boss Mary Daly was open to any options with regards to a cut in December.

Governor Stephen Miran, a Trump nominee, wanted to see more cuts.

"The divergence in opinions reinforces Fed Powell's assessment that another fed funds rate in December is not a foregone conclusion, with the lack of data adding to the need to wait before making a decision (when driving in a fog, best to slow down)," wrote National Australia Bank's Rodrigo Catril.

Data on Monday indicated some further weakness in the US economy, with a key gauge of activity in the manufacturing sector contracting more than expected and for an eighth straight month in October as demand and output weakened.

- Key figures at around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.1 percent at 52,361.14 (break)

Hong Kong - Hang Seng Index: UP 0.2 percent at 26,207.16

Shanghai - Composite: FLAT at 3796.80

Euro/dollar: DOWN at $1.1506 from $1.1518 on Monday

Pound/dollar: DOWN at $1.3120 from $1.3138

Dollar/yen: UP at 154.31 yen from 154.20 yen

Euro/pound: UP at 87.70 pence from 87.67 pence

West Texas Intermediate: DOWN 0.2 percent at $60.93 per barrel

Brent North Sea Crude: DOWN 0.2 percent at $64.76 per barrel

New York - Dow: DOWN 0.5 percent at 47,336.68 (close)

London - FTSE 100: DOWN 0.2 percent at 9,701.37 (close)

E.Gasser--VB