Asian Stocks Rally to Record High Amid AI Concerns Ease & US Data Watch

Asian stock markets continued their upward trajectory on Tuesday, reaching fresh record highs, fueled by a rebound in US technology shares and easing concerns surrounding valuations in the artificial intelligence sector. The MSCI Asia Pacific Index rose 1%, driven by gains in tech giants like SoftBank Group Corp. And Taiwan Semiconductor Manufacturing Ltd.

Japan’s Nikkei 225 Index led the gains, surging 2.3% to an all-time high, building on momentum from a recent election result. This followed a positive session on Wall Street, where the S&P 500 closed near a record high on Monday, as some of the stocks most affected by last week’s sell-off experienced a recovery.

The dollar edged up slightly, recovering some ground lost on Monday, while Treasury yields remained stable as traders prepared for the release of Wednesday’s US jobs report. Gold and silver, which have benefited from the broader risk-on sentiment alongside equities, saw some profit-taking, resulting in a slight decline in prices.

The recent market moves suggest a cooling of anxieties surrounding the AI-driven investment boom that had rattled markets in recent weeks. While the long-term implications of substantial spending on AI remain a topic of debate, the immediate pressure appears to have eased. Investors are now keenly focused on upcoming US economic data, which will provide further clues about the Federal Reserve’s monetary policy path.

“When markets sell off like certain areas in tech have, there’s often knee-jerk rallies,” noted Sameer Samana at Wells Fargo Investment Institute. “Time will tell if we need a retest or if enough value was created.”

Further illustrating the scale of investment in the tech sector, Alphabet Inc. Is increasing the size of its US dollar bond offering to $20 billion, exceeding its initial target of $15 billion. The company is also exploring sales in Switzerland and the UK, including a rare 100-year bond in the UK market. This move underscores the significant financing needs of major tech companies as they ramp up capital expenditures related to AI and other technologies.

Analysts forecast that capital expenditures for the four largest US tech companies could reach approximately $650 billion in 2026, potentially driving a financing boom and reshaping the global economy. This level of investment highlights the transformative potential of AI and the willingness of companies to invest heavily in its development and deployment.

Within the US market, Oracle Corp. Experienced a notable rebound, with its shares jumping 9.6%, alleviating some concerns about the potential impact of AI on the company’s business. This positive movement contributed to the broader recovery in the tech sector.

“Whether the market is reassessing its positioning in value areas of the equity market, and now seeing software as more than a short-term trade, and whether investors are pushing back into core AI winners, remains to be seen,” wrote Chris Weston, head of research at Pepperstone Group.

The Japanese yen remained volatile, trading around 156 following Prime Minister Sanae Takaichi’s election victory over the weekend. Bitcoin fluctuated near $70,300.

The economic calendar is packed this week with key US data releases, including the jobs report on Wednesday and the consumer price index on Friday. These reports will be closely scrutinized for signals about the health of the US economy and the likely trajectory of inflation.

The jobs report is expected to show a payroll increase of 68,000 in January, with the unemployment rate remaining steady at 4.4%. Importantly, the data will include historical revisions, which are anticipated to show a downward adjustment to payroll figures for the year through March 2025.

Economists will be looking for further evidence of easing inflationary pressures in Friday’s consumer price index. Tuesday’s retail sales figures are projected to show continued solid consumer spending.

These data releases are expected to influence expectations for the Federal Reserve’s next interest rate decision. Market consensus currently anticipates that policymakers will hold rates steady at their next meeting in March, maintaining the current range of 3.5% to 3.75%, as they did in January.

Treasury yields declined on Monday after National Economic Council Director Kevin Hassett suggested that lower US jobs numbers are likely in the coming months due to slowing population growth. This commentary added to the dovish sentiment in the bond market.

“The stabilizing labor market — marked by modest hiring and limited layoffs — should help keep the Fed on track to cut rates once or twice this year, assuming price pressures continue to ease,” said Angelo Kourkafas at Edward Jones.

Elsewhere, Microsoft Corp. Shares were downgraded by analysts, reflecting growing concerns about the potential disruption posed by artificial intelligence to the software sector. Meta Platforms Inc. Received a warning from the European Union regarding policies that restrict the use of rival AI assistants on WhatsApp, potentially leading to further regulatory scrutiny from the Trump administration.

Macquarie Group Ltd. Reported a strong third-quarter profit, driven by its commodities and global markets division, as well as robust performance in its asset management unit.

Market Summary (as of 10:38 a.m. Tokyo time):

Stocks

• S&P 500 futures: Little changed
• Japan’s Topix: Rose 2.1%
• Australia’s S&P/ASX 200: Rose 0.4%
• Hong Kong’s Hang Seng: Rose 0.8%
• Shanghai Composite: Little changed
• Euro Stoxx 50 futures: Little changed

Currencies

• Bloomberg Dollar Spot Index: Little changed
• Euro: Little changed at $1.1904
• Japanese yen: Little changed at 155.90 per dollar
• Offshore yuan: Little changed at 6.9128 per dollar

Cryptocurrencies

• Bitcoin: Little changed at $70,407.95
• Ether: Fell 0.1% to $2,118.44

Bonds

• Yield on 10-year Treasuries: Little changed at 4.20%
• Japan’s 10-year yield: Declined two basis points to 2.255%
• Australia’s 10-year yield: Declined four basis points to 4.82%

Commodities

• West Texas Intermediate crude: Fell 0.2% to $64.23 a barrel
• Spot gold: Fell 0.7% to $5,023.82 an ounce