Asian Stocks Rebound as Fears of Further Fed Tightening Ease; Oil Prices Rise

Asian stocks rebounded after two days of losses on hopes that the Federal Reserve is less likely to raise interest rates again next year.

Bloomberg reported on October 13 that the MSCI Asia Pacific Index rose 0.2%. The gauge had fallen to its lowest level since August in the previous session as selling spread across semiconductor shares, but sentiment recovered somewhat as concerns over prolonged US monetary tightening eased.

Comments from New York Fed President John Williams helped shift the mood. Williams maintained his view that one additional rate increase this year would be appropriate, while projecting that further tightening would not be needed in 2027. US Treasury yields fell and the dollar weakened, easing pressure on technology stocks. Microsoft shares hit a record high, while the S&P 500 erased its intraday decline and ended the session little changed.

Rising crude prices, however, remain a burden for markets. West Texas Intermediate crude rose 0.8% to about $94.80 a barrel, extending gains for a fifth straight session. Brent crude also climbed 0.7% to $106.40 a barrel. Renewed attacks in the Middle East have increased uncertainty over the normalization of oil shipments through the Persian Gulf.

Investors are watching for US consumer price index data due later in the day. Elevated oil prices could keep inflation pressure in place, making the report a key factor in shaping expectations for the Fed's rate path. Josh Gilbert, chief market analyst for eToro in Asia-Pacific, said expectations for fewer Fed rate increases could give Asian equities room to breathe. He added that a lower chance of prolonged tightening would also be positive for Asian technology shares.

US corporate earnings are also drawing attention. JPMorgan Chase, Citigroup and Wells Fargo set new records for third-quarter lending-related income. Goldman Sachs beat market estimates in stock trading, but its fixed-income and rates trading business fell short of expectations. Results from major technology companies are also in focus as doubts grow over whether heavier artificial intelligence spending can translate into profit growth.

US stocks, meanwhile, have remained relatively resilient despite concern over higher rates and rising oil prices. Through the previous session, the S&P 500 had gone 53 straight trading days without posting a decline of more than 1%, the longest such stretch since January 2020. Thomas Martin, senior portfolio manager at Globalt Investments, said the stability was unusual given months of concern over rising rates, surging bond yields and elevated oil prices.